strategy to withdraw RRSP after leaving the country

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strategy to withdraw RRSP after leaving the country

Post by aerosmith » 12 Jun 2009 14:02

Hi,

I am wondering what would be the best (by paying the least amount of tax) strategy to withdraw all the RRSP amount once you are no longer a resident of Canada. I am sure you cannot withdraw the RRSP without paying the tax that is owed. Any suggestions are really appreciated. Assume that the move out of the country is not to the US and is permanent. Thanks.

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Post by adrian2 » 12 Jun 2009 14:24

Once you're a non-resident, you can withdraw any or all the money from your RRSP at a fixed tax rate of 25%. Usually, that is less than the tax break you received at contribution time.

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Post by aerosmith » 12 Jun 2009 15:35

Thanks for the quick response. Looking ahead towards the move in about 5-10 years. I think one should keep contributing to the RRSP/RESP or whatever tax shelter that the CRA provides us with. What would you folks recommend. Keep contributing or should one be better off investing outside the tax shelter?

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Post by izzy » 12 Jun 2009 16:05

adrian2 wrote:Once you're a non-resident, you can withdraw any or all the money from your RRSP at a fixed tax rate of 25%. Usually, that is less than the tax break you received at contribution time.
Depends on the presence of a tax treaty between your destination country and Canada.If there is no tax treaty it's 25%.Some tax treaties provide for a maximum payable to Canada of 15% (in one or two cases it used to be even less) on periodic payments,generally up to twice the minimum RRIF payment is considered a periodic payment (it can be a bit more complicated in certain situations).Remember however that there may also be further tax to pay in your destination country,depending on their tax laws.I believe the same applies to RCAs (Retirement Compensation Arrangements) but they might fall foul of anti avoidance if set up in contemplarion of relocation outside Canada ,I suppose.
It used to be that there were tax advantages in moving to certain countries due to differing definitions of income but as time goes by and treaties are renegotiated these "loopholes"tend to disappear.I doubt there are any circumstances where you would end up at a disadvantage in contributing to a RRSP though unless your marginal rate is lower than 25% of course.
RESP's and TFSAs are a different matter,not sure what the implications would be for those.
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Post by twa2w » 12 Jun 2009 16:22

It may not be that simple - the tax rate can range form 15% to 25% depending on tax treaty. The institution has to withhold 25% and you can apply for a reduction - form NR5
Tax rate can also vary depending on whether periodic payment(RIF) or lump sum.
In some cases you can transfer the RSP to a similiar plan inthe country you are going to .

IANAE, but, when you leave Canada and want to establish non-resident status the government will look at permanence and purpose of being abroad and if you have severed all ties to Canada. Leaving an RSP in Canada among other things may determine lead them to determine you are not non-resident for tax purposes.

you can check IT 221R2, take a look at form NR73.

You also want to invest in a book called 'Canadians Resident Abroad' - it is by Carswell publishing so you likley won't find it in Chapters. There used to be a website www.cdnresabroad.com
or check with Rev Cans international tax office 1-800-267-5177

I am a little out of date on this stuff so I recommend the book. One misstep can cost you dearly.

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Post by Arby » 12 Jun 2009 16:30

This article provides strategies for RRSP withdrawals when moving to USA. I know you indicated you're not moving to USA, but maybe some of the ideas can be applied to other countries.

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Post by Pobre » 12 Jun 2009 19:01

I am wondering what would be the best (by paying the least amount of tax) strategy to withdraw all the RRSP
As mentioned, the Tax Convention between Canada and your country of choice is the key. In most Conventions a lump sum withdrawal will result in 25% withholding tax.
If you change the RSP into a RIF, regardless of your age, and set up a periodic withdrawal, the withholding tax in most conventions becomes 15%. That periodic withdrawal can be set at the GREATER of twice the minimum (for your age) or 10%. If you start the withdrawals before the age of 70, obviously the 10% withdrawal is greater. Note my info is from a decade old memory...and things might have changed.
Look carefully at the convention wording re annuities as some permit an annuity for a specified number of years instead of for life. In that case you could set up the annuity to pay out most or perhaps all of the assets over a 3 or 4 year period, with a withholding tax of 15%. Obviously you would require a person who is very familiar with the particular convention, and current CRA thinking to set up such an annuity.

If your move is going to be on a permanent basis, as opposed to temporary in order to get at your RSP at a low tax rate, then I would suggest taking your money out of the RSP as slowly as possible as that way you will have a nest egg with a Canadian financial institution that you know and hopefully can trust, offsetting some of the risk that you will likely take on when investing with offshore institutions.

I suggest a visit to a consultant specializing in expat taxes, prior to making your final decision. Also medical insurance can become a major expense to a retiree, and I'm not sure severing ties makes sense from a financial point of view, unless your assets are in the several million dollar range.

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Post by Norbert Schlenker » 12 Jun 2009 19:51

Lots of good advice above. It is absolutely critical to understand how the country you end up in will tax the RRSP withdrawals too, not just what Canada will get from you when the dollars are on the way out. Don't assume that it's necessarily simple in foreign countries. (If you think it's going to be, say because you're moving to a warm little place with no income tax, then chances are there is no tax treaty and Canada will ding 25%.)

It's always worth consulting one of the big accounting firms. If you have some flexibility about where you will go, e.g. an EU passport entitles you to reside in any EU country so you may have more options than you think, then a professional opinion about what will work best for you may very well be worth the money. Although treaties are getting more uniform, there are still some strange anomalies here and there that might just suit your circumstances.

Finally, a note about the 15% limit on periodic payments if you end up in most treaty countries. The more recently negotiated or renegotiated treaties usually specify the limit to be the lesser of 15% or the rate that would be payable if the periodic payments were received by a Canadian resident. With the personal credit at ~$10k and other credits (spousal, age, etc.) applying as well, there may be no Canadian tax payable whatsoever on modest amounts.
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Post by kcowan » 13 Jun 2009 11:08

For the fun of it...Keith

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Post by aerosmith » 13 Jun 2009 13:04

oh wow! Thank you very much for all of your replies. This was really useful and helpful.

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Re: strategy to withdraw RRSP after leaving the country

Post by Kennichiwa » 18 Apr 2017 08:54

I have a question regarding RRSPS and closing them while residing outside of Canada. If I return to Canada and withdraw my RRSP while residing outside of Canada I understand that there is a 25% charge and that can't be avoided. That being said will I have to file for income tax or am I exempt since I no longer live in Canada? Also to cut costs is it possible for me to withdraw my wife's as well? And if so what kind of paperwork or documents are required.
Thank you for any useful information.

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Re: strategy to withdraw RRSP after leaving the country

Post by adrian2 » 18 Apr 2017 09:11

Kennichiwa wrote:
18 Apr 2017 08:54
I have a question regarding RRSPS and closing them while residing outside of Canada. If I return to Canada and withdraw my RRSP while residing outside of Canada I understand that there is a 25% charge and that can't be avoided. That being said will I have to file for income tax or am I exempt since I no longer live in Canada?
You don't need to file a tax return for that.
Also to cut costs is it possible for me to withdraw my wife's as well? And if so what kind of paperwork or documents are required.
That's a question for the institution holding your wife's RRSP. Usually you need power of attorney for that.
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Re: strategy to withdraw RRSP after leaving the country

Post by twa2w » 18 Apr 2017 13:07

The 25% is not a fee. It is tax.

Depending on what country you are in, and the tax treaty, you may get a lower rate.

You may also have to claim the income from the RSP in your country but if so, you should get a corresponding tax credit for the 25% tax you paid to Canada.

Depending on your age, it may make more sense to convert your RSP to a RIF and take payments.
These are classified as periodic payments and normally taxed at 15% by Canada for non- residents.
Check the rules if you do this as there are, or at least there were, maximums you could set the periodic paymets at for non residents. It used to be the greater of 2X the minimum(standard RIF % minimum payment) or 10% of balance of RIF. IIRC.
In other words you couldn't convert to a RIF and take the entire balance in 12 periodic payments in order to be taxed at 15% rather than 25%. Not sure if this is still the case.

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Re: strategy to withdraw RRSP after leaving the country

Post by brucecohen » 18 Apr 2017 13:20

twa2w wrote:
18 Apr 2017 13:07
Depending on your age, it may make more sense to convert your RSP to a RIF and take payments.
These are classified as periodic payments and normally taxed at 15% by Canada for non- residents.
Check the rules if you do this as there are, or at least there were, maximums you could set the periodic paymets at for non residents. It used to be the greater of 2X the minimum(standard RIF % minimum payment) or 10% of balance of RIF. IIRC.
In other words you couldn't convert to a RIF and take the entire balance in 12 periodic payments in order to be taxed at 15% rather than 25%. Not sure if this is still the case.
I recently researched this for someone in the US. Your info is still current. The allowable withdrawal is based on Jan 1 value.

Here's another strategy. If the OP's worldwide income is low, he might be able to reduce or even avoid the Canadian withholding liability by filing a voluntary Section 217 return. Section 217 offers low-income non-residents the same treatment as residents. Basically, you file an alternative Canadian tax return that reports your worldwide income and claims the same standard credits that a Canadian resident would. If the tax due is less than the tax withheld on your RRSP/RRIF withdrawal, CRA will refund the difference. You might even get a full refund. Try this calculator.

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Re: strategy to withdraw RRSP after leaving the country

Post by JacekN » 07 Nov 2017 22:00

Very interesting topic and lots of good information to study in days to come.

Without going into the other potentially better options as far as taxes are concerned, please help me understand the following option. I'm just taking and learning one option at a time.

Let's assume I need to leave Canada for unforeseeable amount of time. For family reasons, I will need to permanently live in EU. This can be three years or 20 years. Impossible to tell.
1. While not living in Canada, can I keep managing my RRSPs and TFSAs the same way as I do now? I'm not referring to contributions - just buy/sell stock to increase value of the portfolio. Looking for any information that might surprise me here, as I assume there are no issues managing these funds while not living in Canada.
2. If I come back to Canada each year for a week and withdraw $30K CAD from my open RRSP and take cash to Europe, I understand from above posts that the bank will withhold 25% of that. So essentially, $6K CAD goes to the tax man and I have $24K CAD in my hands. Please confirm if my reasoning is correct.
3. What happens to my income tax return when I'm in Canada for only a week in a given year and show $30K CAD income (withdrawal from open RRSP).
4. Would I need to fly into Canada to withdraw from my open RRSP or could I do this from EU? If latter, any differences between flying in or not flying in? Just wondering if I can save the air fare.

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Re: strategy to withdraw RRSP after leaving the country

Post by twa2w » 10 Nov 2017 11:56

JacekN wrote:
07 Nov 2017 22:00
Very interesting topic and lots of good information to study in days to come.

Without going into the other potentially better options as far as taxes are concerned, please help me understand the following option. I'm just taking and learning one option at a time.

Let's assume I need to leave Canada for unforeseeable amount of time. For family reasons, I will need to permanently live in EU. This can be three years or 20 years. Impossible to tell.
1. While not living in Canada, can I keep managing my RRSPs and TFSAs the same way as I do now? I'm not referring to contributions - just buy/sell stock to increase value of the portfolio. Looking for any information that might surprise me here, as I assume there are no issues managing these funds while not living in Canada.

This may surprise you. It may depend on the country in the EU that you are in. You will have to check with your broker to confirm. If in the UK you may have issues but most others are OK.

Not specific to handling your brokerage acvount, but you must ensure CRA approves you as non-resident. This entails recording the date you left Canada, on your final Canadian tax return. It may also involve completing an NR73 form to ensure you are nonresident for tax purposes. CRA will look at your ties to Canada which include things like RSP's, keeping drivers license, home etc.

If you are leaving your family here and going to France to look after an ailing mother and will not be working in France, and planning on returning in the distant future, then you will likely be deemed a Canadian resident and required to file tax here.
2. If I come back to Canada each year for a week and withdraw $30K CAD from my open RRSP and take cash to Europe, I understand from above posts that the bank will withhold 25% of that. So essentially, $6K CAD goes to the tax man and I have $24K CAD in my hands. Please confirm if my reasoning is correct.

Correct, providing your broker is aware of your country of residence, and has flagged you as a non-resident and the tax treaty between Canada and your country sets the withholding at 25% as most do. And as above, CRA agrees you are a non-resident.
3. What happens to my income tax return when I'm in Canada for only a week in a given year and show $30K CAD income (withdrawal from open RRSP).
Nothing. No tax reporting is necessary in Canada assuming, again, that CRA agrees you are non-resident.
4. Would I need to fly into Canada to withdraw from my open RRSP or could I do this from EU? If latter, any differences between flying in or not flying in? Just wondering if I can save the air fare.
This is a question for your broker but assuming they allow on line access for non-resident persons, then you should be able to do this on line.

The better way to do this in my opinion and this will depend on your age and amount in the RSP.
Assume CRA recognizes you as non resident. Convert your RSP to a RIF and set up a scheduled monthly payment of whatever you feel your annual needs are - say 2500.00 in your example.
The tax treaty with most countries for periodic payments of this nature is only 15%.
If you come back to Canada sooner than expected, you can convert the RIF back to an RSP.( assuming under age 71). The worst thing is that you would have to withdraw the minimum payment for the year you convert back which would be under 5%, if this amount hadn't already been taken for that year.

CRA has some decent info on their website on non- residency and some of the issues.

Hope this helps. We get more people here moving to the USA and back so not a lot of EU experience.

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Re: strategy to withdraw RRSP after leaving the country

Post by shaneinspain » 11 Nov 2017 17:44

You don´t have to convert all of your RRSP to a RRIF you can open a RRIF (or more than 1) before age 71 as well and fund it from your RRSP.
This gives you more control of the minimum forced withdrawal by law. Also as sta ted before only 15% withholding is taken.
This you may get back if you file Canadian 217 depending on income. Also withdrawing from a RRIF is free compared to a charge from an RRSP.
Please correct me if any above is incorrect as I am a non-resident looking to get funds out of my RSP paying the min tax by law.

Sk in spain

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Re: strategy to withdraw RRSP after leaving the country

Post by Mossrider » 11 Nov 2017 21:45

All depends on which country as they have individual treaties with Canada. Also your age and anticipated income whilst in the EU.

I'm British and have made some plans for our eventual return. firstly with the canada-uk treaty there are no withholding taxes on periodic pension payments. The simplest option is therefore to convert to an Rrif prior to leaving. You will still pay UK tax in this case, but you can always bung it in a British pension if you don't need to live off it and get the tax back. I am unsure as to whether you are allowed to convert to an Rrif after becoming non resident, but I think that is problematic.
All countries will offset the tax paid against their taxes, but that could be messy and you could end up paying a higher rate of tax if your local tax rate is less that 25 percent.
Each country is different. In our case the simplest option is to convert and accept minimum Rrif payments. Your situation is likely to be different. My suggestion is that you maximise your contributions and see a specialist advisor sometime before you leave for up to date and accurate information. It's not just Canadian tax, but also the tax situation in the receiving country you need to understand.

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Re: strategy to withdraw RRSP after leaving the country

Post by JacekN » 12 Nov 2017 15:32

twa2w, Mossrider, thanks to you both for taking the time to educate us. Both of you concentrate on RRIF/non resident option which I fully understand might end up being a better one. However, in order to arrive at that understanding on my own, I'm still trying to digest the option of living away from Canada while still being a resident and drawing from open RRSP which (hopefully) takes any treaty/local tax issues out. At this point, I have no plans to stop being a Canadian resident. I do have family here, may leave some real estate in my name for my son to live in, and will definitely want to keep my driver's licence. :)

So again, the non-resident RRIF might be the best option, it's easy to understand and posts here provide very good explanation for this scenario. Now, back to the resident who needs to live in Europe for family reasons and wants to draw from open RRSP/TFSA.

1. While not living in Canada, can I keep managing my RRSPs and TFSAs the same way as I do now? I'm not referring to contributions - just buy/sell stock to increase value of the portfolio. Looking for any information that might surprise me here, as I assume there are no issues managing these funds while not living in Canada. Let's not worry about what the bank might say, as I can move my RRSPs or have someone else login to execute transactions. I'm strictly referring to issues that the government might have.

2. If I come back to Canada each year for a week and withdraw $30K CAD from my open RRSP and take cash to Europe, I understand from above posts that the bank will withhold 25% of that. So essentially, $6K CAD goes to the tax man and I have $24K CAD in my hands. Please confirm if my reasoning is correct, keeping in mind that I would still be a resident of Canada.

3. What happens to my income tax return when I'm in Canada for only a week in a given year and show $30K CAD income (withdrawal from open RRSP). I'm still a resident of Canada, so I understand income tax must be filed/paid. But with only a week of presence here, what would the tax bracket be?

4. Would I need to fly into Canada to withdraw from my open RRSP or could I do this from EU? If latter, any differences between flying in or not flying in for tax owned or income tax filing through an accountant here while I'm living away? Just wondering if I can save the air fare without causing any issues to my situation.

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Re: strategy to withdraw RRSP after leaving the country

Post by twa2w » 12 Nov 2017 17:04

JacekN,
You need to give us more information. What country are you going to be living in and are you going to earn income in that country? Who is your broker?

There is physical residency which is different from residency for tax purposes. There are tax treaties between Canada and other countries and surprisingly, they can vary quite a bit. Canada does not have one tax treaty for the EU, but one for each country.
Some countries like the USA/ UK have securities laws that can cause issues for physical residents to maintain and trade Cdn accounts. There are also restricted countries under other Federal government rules that can restrict dealings if you live there but none in the EU that I can think of off the top of my head.

It can get complicated if you are a physical resident of another country while still being a deemed resident of Canada for tax purposes.

Normally for most tax treaties, the witholding tax on RSP withdrawals is 25% but as a tax resident of Canada, the witholding tax is 30%.

So let us assume you maintain your home mailing address in Canada but live temporarily in the EU and do not earn any income there.
As far as your broker is concerned you are a physical Canadian resident and CRA shows you as a Canadian resident for tax purposes. You should be able to trade your brokerage account but any withdrawals of 30,000 would attract 30% withholding tax. You would file a Canadian tax return as a Canadian tax resident and you may get some of the withholding tax back depending on other incone etc.
You tax bracket is based on your income, and in your case has nothing to do with your time in Canada as you are a deemed tax resident for the year.

The government will not have any issues with you trading your RSP while residing in any EU country that I am aware of.

If you indicate to your broker/bank you are living in another country, they will code your account that way. You will be subject to the withholding tax under the appropriate tax treaty for withdrawals and be subject to whatever restrictions apply to trading. It may affect withholding tax on dividends on US stocks as well. As a deemed tax resident of Canada you would still file your Canadian tax.

Generally speaking, with most EU countries, you will have no issues trading your RSP, TFSA and should be able to withdraw online. No need to fly back.

Just some additional information
You can assign someone trading authority on your brokerage account. They can trade but cannot normally withdraw money. ( your broker will have forms)
If you draw up a power of attorney, that person can trade and can also process withdrawals. There are risks to this of course.

RSP withdrawals of less than 5000 have withholding tax of 10%, 5,000 to 14,999 have 20% and 15,000 + the withholding is 30%. For Canadian residents.

You normally lose your healthcare coverage in Canada once you are out of the country physically for 6 months but there are ways to extend this coverage for longer stays outside Canada up to 2 years I believe.

Sorry if I rambled too much - hope I addressed your questions coherently

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Re: strategy to withdraw RRSP after leaving the country

Post by freedom_2008 » 12 Nov 2017 18:04

JacekN wrote:
12 Nov 2017 15:32
At this point, I have no plans to stop being a Canadian resident. I do have family here, may leave some real estate in my name for my son to live in, and will definitely want to keep my driver's licence. :)
AFAK, if you are a Canadian citizen, leave temporarily for personal reason and keep your Canadian connections, you could become a "factual resident of Canada". But it is best to check with an accountant or with CRA by filling the NR73 (https://www.canada.ca/en/revenue-agency ... r73.htmlIf)
1. While not living in Canada, can I keep managing my RRSPs and TFSAs the same way as I do now? I'm not referring to contributions - just buy/sell stock to increase value of the portfolio. Looking for any information that might surprise me here, as I assume there are no issues managing these funds while not living in Canada. Let's not worry about what the bank might say, as I can move my RRSPs or have someone else login to execute transactions. I'm strictly referring to issues that the government might have.
As a factual resident of Canada, you can handle RRSP/TFSA the same way as you do now, on-line or in-person. But your provincial health plan and other benefits that need certain length of physical presence here may be impacted.
2. If I come back to Canada each year for a week and withdraw $30K CAD from my open RRSP and take cash to Europe, I understand from above posts that the bank will withhold 25% of that. So essentially, $6K CAD goes to the tax man and I have $24K CAD in my hands. Please confirm if my reasoning is correct, keeping in mind that I would still be a resident of Canada.
25% is for non-resident. For factual residents of Canada, regular withdraw withhold would apply: 10% for under $5000, 20% for $5000 to $15000, 30% for over $15000
3. What happens to my income tax return when I'm in Canada for only a week in a given year and show $30K CAD income (withdrawal from open RRSP). I'm still a resident of Canada, so I understand income tax must be filed/paid. But with only a week of presence here, what would the tax bracket be?
As a factual resident of Canada, your income is taxed as if you never left Canada. And you have report your world wide income (say if you have bank account that earns interests in EU), not just CAD income. The same tax bracket as you live in Canada.

4. Would I need to fly into Canada to withdraw from my open RRSP or could I do this from EU? If latter, any differences between flying in or not flying in for tax owned or income tax filing through an accountant here while I'm living away? Just wondering if I can save the air fare without causing any issues to my situation.
No, you don't need to fly back, and there is no difference if you do it in or outside Canada, if you are a a factual residents of Canada.

Also you may want to check the EU place you plan to stay, to see if they require you to pay income tax if you stay there over certain length.
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Re: strategy to withdraw RRSP after leaving the country

Post by JacekN » 14 Nov 2017 20:49

twa2w,

I'm Polish but I would like to stay away from any country specific solution as much as possible for the scenario I'm trying to analyze. I might need less money that I mentioned and I might get some tax breaks due to treaties, as well. These to me are icing on the cake and not the very base of the plan. As you can see, the plan is very simple: withdraw money in Canada where there should be no problem with that, take tax hit that is known ahead of time, then take cash to Europe where nobody should have any problems with that, either. If I can determine that my leave would be long enough to deal with a RRIF, or a tax treaty gives me a break, that'll be a bonus.



twa2w, freedom_2008,

Thank you both for extensive and on-point answers. This really helps a lot. Especially, the part on layered RRSP withholding amounts, which I thought were flat. Also, somehow I had the idea that shorter presence in Canada in a given year would increase my taxes for that year, as opposed to living here for most part of the year. So it really helps to know that length of stay won't be a factor. If you still have the patience to explain the layer and tax liability, please educate further.

Assuming that as a resident I withdraw $40,000 from my unlocked RRSP, I understand from the layers you mentioned that the bank will withhold $10,000.
First $5,000 @10% = $500
Next $10,000 @20% = $2,000
Next $25,000 @30% = $7,500
Total Withheld Amount = $10,000

What then happens at tax filing time? I used an online Ontario tax calculator where I punched in $40K as 'Other Income' and tax liability is calculated to $5,761. So would I get a refund of $4,239?

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Re: strategy to withdraw RRSP after leaving the country

Post by freedom_2008 » 15 Nov 2017 12:51

JacekN wrote:
14 Nov 2017 20:49

twa2w, freedom_2008,

Thank you both for extensive and on-point answers. This really helps a lot. Especially, the part on layered RRSP withholding amounts, which I thought were flat. Also, somehow I had the idea that shorter presence in Canada in a given year would increase my taxes for that year, as opposed to living here for most part of the year. So it really helps to know that length of stay won't be a factor. If you still have the patience to explain the layer and tax liability, please educate further.

Assuming that as a resident I withdraw $40,000 from my unlocked RRSP, I understand from the layers you mentioned that the bank will withhold $10,000.
First $5,000 @10% = $500
Next $10,000 @20% = $2,000
Next $25,000 @30% = $7,500
Total Withheld Amount = $10,000

What then happens at tax filing time? I used an online Ontario tax calculator where I punched in $40K as 'Other Income' and tax liability is calculated to $5,761. So would I get a refund of $4,239?
JacekN,

The withhold rates applies to the whole amount, not layered within the same withdrawal. So for $40,000, the withhold amount will be $12,000. If that is your only (world) income, at tax time, you entered it under "RRSP income" and enter the withhold amount under "income tax deducted", you should get some refund back.

If you are 65 or older, it is better to convert RRSP into RRIF as
1. The first $2000 withdrawal from RRIF is tax free, and
2. there is no withhold for the annual minimum amount (based on your age) withdrawn from a RRIF

You can read more on this site:
https://ca.rbcwealthmanagement.com/dele ... 27/content

You can also use a good tax calculator from TaxTips and select 2017 to check refund amount: http://www.taxtips.ca/calculators/canad ... ulator.htm
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twa2w
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Re: strategy to withdraw RRSP after leaving the country

Post by twa2w » 15 Nov 2017 13:31

Sorry JacekN, freedom88 is right. I didn't mean to give you the impression that an individual withdrawal from an RSP is tiered for tax with holding. My poor wording.

What some people do is take out a series of 5,000 withdrawals to keep the withholding at 10%.

One 10,000 withdrawal will be 20% = 2000.00

Two 5,000 withdrawals taken a few weeks apart would be 10% each so 2X 500 =1000
Taking them at the same time does not work.

Either way you have to reconcile at the end of the year on your tax return and either pay more or get a refund.

There was talk a few years ago of banks having to keep track of withdrawals and ensure total tax withheld matched the amount withdrawn for the tier. In other words in my example above,
The first 5,000 withdrawal would be 500 withheld, but the second 5,000 withdrawal would have 1500 withheld to meet the 20% requirement for the total amount withdrawn year to date. Nothing came of this AFAIK.

As Freedom 88 says, there is no witholding tax on the minimum required payment on a RIF. And then the tiers mentioned above apply.
You still have to reconcile your taxes at tax time and as mentioned, if you are over 65 with rif income or certain other pension iincome, you get an extra 2,000 tax credit on top of your personal and other exemptions.

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patriot1
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Re: strategy to withdraw RRSP after leaving the country

Post by patriot1 » 18 Nov 2017 09:07

The actual tax reduction is 15% of $2000, i.e. $300. As a result, the first $2000 withdrawn is tax free only if your marginal tax rate does not exceed 15%.

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