Are Canadian pensions taxed in France?
If you are considering retiring to France, you might be wondering whether you will still be able to access your Canadian pension and if it will be subject to French taxes. Here is what you need to know.
Before going any further, it is worth noting that this article is meant to give an overview of the pensions situation for people with Canadian pensions. It does not replace professional financial advice, and Canadians looking to retire in France should still seek out expert financial assistance as needed.
The first step is to determine whether or not you are a tax resident in France (you can look through our guide). All tax residents must fill out a yearly tax declaration, and they must report all global income, even if it is not subject to tax in France.
You should also consider if you have a pension from another country besides Canada, as different rules may apply based on that country's bilateral tax treaty with France. Here is the situation for British, American, and Australian pensions, and here is an overview of the system.
Where is my pension taxed?
In Canada, the pensions system includes multiple tiers of public and private schemes, but luckily the double tax treaty between Canada and France is explicit about where pensions are taxed.
The Local spoke with Isaac Barchichat, a registered CPA in France, Canada and the USA to understand the situation for Canadians in France. He is a managing partner at Monceau CPA, an international accounting firm based in Paris with offices in the US and Canada.
He told The Local: "Tax treaties usually follow the OECD model, which means that Article 18 is usually focused on pensions.
"Article 18 for the Canada-France treaty is very similar to the USA-France treaty. This means that pensions are taxed in the country that they are issued in," he said.
As a result, any Canada-based pension - whether that is the Old Age Security plan, the CPP (Canada Pension Plan) or QPP (Quebec Pension Plan), or a private personal or employer plan (such as Registered Retirement Savings Plans, or RRSPs) - would be taxed in Canada, not France.
Barchichat explained that Canadians in France should still declare their pension income in France. Like Americans, they will receive a tax credit from France attesting that they have already paid tax in Canada on their pension.
"People should still maintain proof that the pension was already subject to tax, in case of an audit," he added.
Barchichat also recommended that Canadians resident in France can make use of the 'mention expresse' section in their French tax declaration.
"Sometimes French local tax authorities fail to assess foreign income properly. Using the 'mention expresse' allows you to specify to French tax authorities Article 18 from the tax treaty to ensure that they process your documents properly," he advised.
All of this being said, Canadians should beware that their pension income could still count towards your total household income in France, even though it is not taxed here. As a result, it could end up pushing you into a higher tax bracket.
What about social charges?
In addition to taxes (impôts), France also requires people to pay social charges (prélèvements sociaux) on income. However, only specific types of income can be considered for social charges, such as the CSM charge (PUMa) for healthcare.
The general rule is that pensioners and their spouses do not have to pay the CSM charge, but France specifically exempts people who have a pension from France, the EU, the EEA and the UK (people with S1 forms), as well as their non-working spouses.
There is some debate over whether American and Canadian private pensions ought to be treated as a pension (and therefore exempt from CSM) or as investment income (which can attract CSM charges).
When it comes to Americans, tax expert Jonathan Hadida from HadTax told The Local: "Under the principle of equality amongst taxpayers, URSAAF has treated most US pensions/IRA distributions/401(k) distributions akin to a French/Swiss/European pension and have therefore exempted Americans with pension income."
"I have called URSSAF, and I was told by the representative that they should be paying for PUMa. But in practice, I have not seen many American pensioners charged for it."
It is likely that similar standards are applied to Canadians.
Barchichat, who is licenced in both the US and Canada, said that in his opinion neither American nor Canadian pensioners should be charged for prélèvements sociaux.
"If this happens, it is a mistake by tax authorities", he added. You can learn more about contesting a CSM charge here.
READ MORE: Cotisations: Why you might get an unexpected French health bill
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Before going any further, it is worth noting that this article is meant to give an overview of the pensions situation for people with Canadian pensions. It does not replace professional financial advice, and Canadians looking to retire in France should still seek out expert financial assistance as needed.
The first step is to determine whether or not you are a tax resident in France (you can look through our guide). All tax residents must fill out a yearly tax declaration, and they must report all global income, even if it is not subject to tax in France.
You should also consider if you have a pension from another country besides Canada, as different rules may apply based on that country's bilateral tax treaty with France. Here is the situation for British, American, and Australian pensions, and here is an overview of the system.
Where is my pension taxed?
In Canada, the pensions system includes multiple tiers of public and private schemes, but luckily the double tax treaty between Canada and France is explicit about where pensions are taxed.
The Local spoke with Isaac Barchichat, a registered CPA in France, Canada and the USA to understand the situation for Canadians in France. He is a managing partner at Monceau CPA, an international accounting firm based in Paris with offices in the US and Canada.
He told The Local: "Tax treaties usually follow the OECD model, which means that Article 18 is usually focused on pensions.
"Article 18 for the Canada-France treaty is very similar to the USA-France treaty. This means that pensions are taxed in the country that they are issued in," he said.
As a result, any Canada-based pension - whether that is the Old Age Security plan, the CPP (Canada Pension Plan) or QPP (Quebec Pension Plan), or a private personal or employer plan (such as Registered Retirement Savings Plans, or RRSPs) - would be taxed in Canada, not France.
Barchichat explained that Canadians in France should still declare their pension income in France. Like Americans, they will receive a tax credit from France attesting that they have already paid tax in Canada on their pension.
"People should still maintain proof that the pension was already subject to tax, in case of an audit," he added.
Barchichat also recommended that Canadians resident in France can make use of the 'mention expresse' section in their French tax declaration.
"Sometimes French local tax authorities fail to assess foreign income properly. Using the 'mention expresse' allows you to specify to French tax authorities Article 18 from the tax treaty to ensure that they process your documents properly," he advised.
All of this being said, Canadians should beware that their pension income could still count towards your total household income in France, even though it is not taxed here. As a result, it could end up pushing you into a higher tax bracket.
What about social charges?
In addition to taxes (impôts), France also requires people to pay social charges (prélèvements sociaux) on income. However, only specific types of income can be considered for social charges, such as the CSM charge (PUMa) for healthcare.
The general rule is that pensioners and their spouses do not have to pay the CSM charge, but France specifically exempts people who have a pension from France, the EU, the EEA and the UK (people with S1 forms), as well as their non-working spouses.
There is some debate over whether American and Canadian private pensions ought to be treated as a pension (and therefore exempt from CSM) or as investment income (which can attract CSM charges).
When it comes to Americans, tax expert Jonathan Hadida from HadTax told The Local: "Under the principle of equality amongst taxpayers, URSAAF has treated most US pensions/IRA distributions/401(k) distributions akin to a French/Swiss/European pension and have therefore exempted Americans with pension income."
"I have called URSSAF, and I was told by the representative that they should be paying for PUMa. But in practice, I have not seen many American pensioners charged for it."
It is likely that similar standards are applied to Canadians.
Barchichat, who is licenced in both the US and Canada, said that in his opinion neither American nor Canadian pensioners should be charged for prélèvements sociaux.
"If this happens, it is a mistake by tax authorities", he added. You can learn more about contesting a CSM charge here.
READ MORE: Cotisations: Why you might get an unexpected French health bill
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