Canadian residents are taxed on their worldwide income. If you have a pension from a foreign country you are required to report it on your Canadian tax return.
For tax years from 2019 onward, the Canada Revenue Agency (“CRA”) advises to report the total amount in Canadian dollars of your foreign pension on line 11500 (other pensions and superannuation), of your tax return in the tax year that you received it. For tax years prior to 2019, line 11500 was line 115. The CRA also advises to attach a note to your paper return identifying the type of pension you received and the country it came from.
If you have unreported foreign pension income, you may be assessed with penalties and interest on top of the tax that you owe,and could face criminal prosecution. If the unreported income goes back several years, the penalties and interest, will likely end up being substantially more than the original tax debt, and what started out as a manageable tax debt, could end up causing you to lose your home or your life savings.
In such a case you should apply for tax relief through the CRA’s Voluntary Disclosure Program (“VDP”). If you disclose your unreported foreign pension income through the VDP program, then you may be granted a waiver of penalties and prosecution, and cancellation of part of the interest. But in order to be eligible for tax relief through the VDP program, you must make a VDP application to the CRA BEFORE the CRA contacts you or a related person. If the CRA contacts you first, then you are too late.