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V2239-24 16 October 2024 · SG de Fiscalidad Internacional Criterion in force
IRPF · renta mundial

Spanish resident withdraws Canadian pension funds; tax retention applies under Spain-Canada CDI

A Spanish tax resident withdrawing from a Canadian pension plan faces a 25% retention. The DGT examines the Spain-Canada CDI (arts. 18 and 23) and concludes Spain taxes income as resident state; if the amount qualifies as pension, Canada may retain up to the lower of 15% of gross amount or the rate payable as a Canadian resident; if it is an annuity, the Canadian limit is 15%, except for fixed-rate payments where no limit applies.

The question raised

Treatment of income received for the purposes of the Convention for the avoidance of double taxation signed between Spain and Canada.

The DGT's ruling

The specific nature of the income (pension or annuity) determines the withholding limits in Canada. For pensions with periodic payments, the Canadian tax may not exceed the lesser of 15% of the gross amount or the equivalent percentage that would be paid as a resident in Canada. For annuities, the limit is 15% of the yield subject to tax in Canada, except for lump-sum payments which have no limit. Spain eliminates double taxation through a deduction pursuant to Article 23 of the Convention, provided that the deductible amount does not exceed the amount taxable in Canada according to the Convention.

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