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Withholding tax on a Canadian RRSP for foreighn residents
Old 05-30-2013, 04:09 PM   #1
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Withholding tax on a Canadian RRSP for foreighn residents

Hello

This question refers to a Canadian citizen living in a foreign country with RRSP's held at a Canadian institution or bank. Can anyone tell me if the applicable withholding tax for a lump sum withdrawal from an RRSP is held at the source (deducted from the net amount by the payee) or if you are simply responsible for any resulting tax liability when you file the tax return for the year the withdrawal was taken?

Thanks in advance
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Old 05-30-2013, 04:40 PM   #2
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For non-residents of Canada, withholding is 25% unless reduced by a treaty. See IC76-12R , Applicable rate of part XIII tax on amounts paid or credited to persons in countries with which Canada has a tax convention.
IC76-12R6 - Applicable rate of part XIII tax on amounts paid or credited to persons in countries with which Canada has a tax convention
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Old 05-30-2013, 05:19 PM   #3
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Quote:
Originally Posted by Spudd View Post
For non-residents of Canada, withholding is 25% unless reduced by a treaty. See IC76-12R , Applicable rate of part XIII tax on amounts paid or credited to persons in countries with which Canada has a tax convention.
IC76-12R6 - Applicable rate of part XIII tax on amounts paid or credited to persons in countries with which Canada has a tax convention
This is correct, but to figure out exactly how much tax you owe in Canada and your country of residence you will have to apply the relevant tax treaty. The usual practice is to pay your country of residence the tax due under their system and then claim that tax paid back as a foreign tax credit, unless there is some provision exempting you from taxation in a country. Where do you reside?
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Old 05-30-2013, 06:29 PM   #4
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Hi Rodi,

The link below takes you to TD's information on withdrawing from an RRSP (#19). While the information is aimed at residents of Canada, the key sentence is:

Withholding taxes apply on funds withdrawn from an RRSP except when funds are transferred from one RSP to another directly, or when funds are transferred to a retirement income option such as a registered retirement income fund (RRIF).


RRSP - Registered Retirement Savings Plan | TD Canada Trust

As an example, below is the form required to withdraw RRSP funds for a Lifelong Learning Plan (LLP). It gives the institution clear instructions on how much to withhold before releasing the money to you.

http://www.tdwaterhouse.ca/apply/forms/520340.pdf

I presume the withholding would still apply if you live outside Canada. The final tax liability would be sorted out later. Here is a relevant Q&A from 2010:

Canada RRSP withdrawal for US resident - Expert Income Tax help on cross Border tax and immigration and divorce and RRSP and IRA and other matters with david Ingram, Tax Consultant and Preparer

Hope that helps!
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