So what should you do with your RRSP if you leave Canada? The simple answer is you can keep your RRSP as is. However, if you want to access the funds in the future there will be a 25% tax withholding, this amount is considered your tax paid. If you are happy with this you don’t need to do anything further.
If you believe your tax payable should be less than 25%, you can elect to file Canadian taxes and the difference would be refunded. Keep in mind that for RRSPs the amount you redeem is considered income for that year, which means unless you have a small RRSP and no other sources of income, your income tax payable for the amount is not likely to be less than 25% . You may also need to report the amount redeemed as part of your income in your new country as per that country’s income declaration requirements.
If you are certain ahead of time that your income tax payable would be less than 25% you can fill out Form NR5, Application by a Non-Resident of Canada for a Reduction in the Amount of Non-Resident Tax Required to be Withheld. This will reduce your withholding before the redemption even occurs. This process isn’t any easier than filling out taxes, but it only needs to be done every 5 years so it will save you needing to fill out taxes each year if you are doing multiple redemptions.
Another option is to convert your RRSP to a Registered Retirement Income Fund (RRIF) and receive regular payments from the accounts. The same minimum withdrawal requirements apply for RRIFs as they do with RRSPs and the 25% withholding tax also applies to all payments (unless your country of residence has specific tax treaties). A reduced tax withholding amount of 15% is possible for US-Canada. This reduction applies if the payment is less than the greater of 10% of fair market value or twice the minimum withdrawal requirement (amount of withdrawal < greater [10% of FMV, 2x RRIF minimum withdrawal]). A preferential NOTA BENE rate can be acquired but only if redemption is scheduled for regular periods.
As an example, suppose you have a $100,000 RRSP (as of December 31, fair market value) which has now been converted to a RRIF, you are currently 65 years and you want to make withdrawals.
The minimum required for RRIF withdrawal for the year is 4% or $4000. You would like to withdraw $12,000 a year or $1000/mon.
Under standard non-resident rules you will receive $750/mon with 25% tax withheld.
If you are in the US, to get the reduced rate: 10% of FMV is $10,000 and twice the minimum withdrawal is $8000. The greater of the two is $10,000. This means the first $10,000 of redemption is tax withheld at 15% and the excess amount is tax withheld at 25%
So for our example, the first 10 months you will received $850/mon and the last two months you will receive $750/mon.
If you are in the UK such periodic payments should not be subject to any withholding.
If you are thinking of withdrawing from your RRSP I would strongly suggest you research your own country’s tax treaty and discuss it with your institution before proceeding. They may still want to withhold 25% and let you deal with CRA to claim any amount that was taken in excess.
Of course, you always need to remember that the amount you take in as income may be subject to taxes in your new tax jurisdiction and will need to be reported as per their tax rules.
You may be able to transfer the amount into registered retirement plans, i.e. 401K etc. The reverse can be done regularly by any large financial institutions in Canada, but I generally find Canadians financial services personnel have more experience dealing with moving money to US than US financial services personnel have in transferring money to Canada.
So in summary – file an NR5 if you really think your tax rates will be less than 25% and see what number they will come up with. Know your tax treaties and use any tax treaty rules in your favour as able, but be prepared to work with your Canadian institution and educate them as required.
What would the withholding tax situation be as a non-resident if I was able to have my RRIF payments made to a Canadian bank account? I am now based in Australia. The tax treaty is 15%.
No it does not make any difference if the funds are paid into a Canadian account. You can look at the tax treaty and see if you can have the withholding reduced.
If you are a non-resident of Canada and a resident of Australia, the withholding rate is 15% per the treaty, regardless of whether it’s a an rrsp or rrif account, and for both lump sum and periodic payments. Keep in mind that unless you are a “temporary resident” under Australian tax purposes, the withdrawal will be subject to Australian taxes at your marginal rates, less the 15% tax credit.
Would if I am a temporary resident filing taxes in Australia under a 457 visa(since 2008)? I have been here since 2006 and canada has declared me a non resident since 2008 after lengthy paperwork. Can I now withdrawl all RRSP and how much Tax and which country would I pay tax to>
Sorry I don’t check my comments often enough, I’m not sure if this will be useful at all by this point.
You would have to contact your financial institution to provide the document from CRA indicating your are a non-resident. As long as the investments are not in term deposits they should be able to do the redemption, there would be a 25% with-holding, although it could be less if Canada and Australia have a specific tax treaty.
The tax withholding should be reportable as tax paid for your Australian taxes. You should of course contact a tax professional in your country to be sure.
I’m a Canadian living in Australia the past 2 years (so non-resident of Canada) – can you point me to a website that describes the 15% withholding rate for RRSP lump sum transfer to Australia? Thanks!
Hello,
I am about to withdraw my RRSPs as a non Canadian resident with the 25% withholding charge. Do I have to declare this money as income in my new country of residence which is France? Or can I just wire the money over and leave it at that?
Also I am pushing myself to finishing paying off an RRSP under the HBP (first house purchase). Do I have to file an income tax return especially for this in 2013? Even if I earned no money in Canada in 2012?
Thanks for your help in this very confusing matter.
Laila
Not sure if this is a little too late. I don’t see why you are paying it off.
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/hbp-rap/spcl/nnrs-eng.html
Wether you need to declare that income in France will depend on how France want to recognize the funds as income or not. I don’t know French rules at all so can’t help you there.
Revenue Canada kind of expect you to file taxes unless you have declared yourself non-resident with them which is a bit of a process. However, if you have severed all your ties with Canada, ie. no longer own home, bank accounts etc you’ll be recognized as non-resident.
And yes if you can be still considered resident of Canada even if you don’t earn income in the country.
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Can an unlocked LIF of a non-resident be transferred into an RRSP in both spouses names? Initially the LIF was only in one name.
Hi, I came across your blog while looking for information about relocating to another county We have been granted permanent residency in Australia and will be moving within the year. We are planning to rent out our principal residence here in Canada for the time being. We also have another income property that our daughter lives in with roommates while at university. She will not be making the move for a couple of years. At that time the income property that she is living in will be sold. In addition we have a large amount of money in RRSP`s here in Canada. We are very confused as to the taxation ramifications in regards to rental income, income tax, in what country it is paid and what to do with our RRSP contributions as well as how to best move currency to Australia. We already have an Australian bank account.. Any help or direction you can give us to point us in the right direction would be greatly appreciated. Thank you
You will need to file Canadian return (section 216) on your rental. Probably this is your best choice, and possibly file the same info on the Australian return. For Aus. best thing is to email their tax folks and simply lay it out, example: “I have a property I’m renting out in Canada, do I simply report the net income/loss on Aus return or treat it as though it was located within Aus?, or do you not want to hear about it at all, meaning CDN income is not taxed in Aus ?” . I did this for the USA and got my answer, so note be sure to check on forced depreciation and time frames for foreign property.
You will want to look at RRIF’s (convert RRSP to RRIF) if you are old enough as the taxation is 15% vs 25% in Canada. Ask this to the AUS tax folks – they may not care about RRSP/RRIF accounts. Unfortunately USA does but they tax worldwide income, unlike most/all other countries.
Oh, 1 other thing, as a non-resident Canadian, you have to pay 25% of rental income in tax within 45 days of receiving it, when you file section 216 return (4 pgs) you can get back most to all of it due to rental expenses. Fortunately CCRA has a website where you can pay from your canadian bank account, which you will need to keep 1 chequing account to deal with the rental.
Best of Luck in Australia.
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We are retired Canadian couple emigrating from Canada to US (green card) in September 2014. We would like to withdraw our RRSP savings.
I have a question for someone who could kindly help us.
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