Right of taxation of a German social security pension under the Double Taxation Agreement (DTA-Canada)

Double taxation agreement Canada

According to Art. 18, para. 1, sent. 2 lit. c) DTA-Canada, Germany as the source state has no right of taxation on pensions from the German statutory pension insurance.

This is on condition that the pensions are based exclusively on contributions paid during periods in which the pension recipient lived outside the source state and also pursued his professional activity there.

If the source state’s share of the right of taxation under treaty law is only minor, the right of taxation is due to the state of residence (no apportionment).


The taxpayer, born in 1952, was resident in Canada in the years of the dispute. Since 1.1.16, he had been receiving benefits from the German Federal Pension Insurance. These benefits were based to a small extent on his contributions as a legal trainee in Germany. For the rest, they were based on professional activities abroad. The taxpayer brought a lawsuit against the tax office, which taxed the pensions on the basis of an effective connection between the professional activity abroad and the pension benefits (Article 18, para. 1, sentence 2 of the DTA Canada).

The lawsuit was successful. The Regional Tax Court stated that the relevant Art. 18 para. 1 p. 2 lit. c) DTA-Canada requires that there is a special relationship (local and personal) between the pension recipient, the pension and the source state and that the pension payment was made for an activity that the recipient performed within the source state while he was a resident there. However, these conditions were not met in the case of the judgement. According to the Regional Tax Court, an apportionment for taxation of the only minor portion (traineeship in Germany) is out of the question.

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