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Member, Beacon International Group, Ltd.
OTTAWACanada has ratified an amended tax treaty with the United States that would allow cross-border employers and their employees to deduct pension contributions on their respective tax returns.
The revised treaty would shield against negative tax consequences for cross-border employees, or residents of one country who commute to or temporarily live and work in the other country. It would allow employers to claim deductions for pension contributions made to qualified retirement plans in the other country on behalf of cross-border employees.
While the current treaty addresses tax issues related to the distribution of pension benefits, there are no provisions governing pension contributions, meaning that cross-border employees and their employers could be taxed on contributions.
Canadian Minister of Finance Jim Flaherty encouraged the United States to quickly ratify the treaty so that employers and employees on both sides of the border can realize its benefits.