Non-Resident Taxation on RRSP and RIF Withdrawals

Allan Madan, CA
 Jun 26, 2015
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Today’s blog will focus on non-resident taxation on RRSP and RIF withdrawals, and the ways that these taxes can be reduced.

Non-resident Taxation on RRSP and RIF Withdrawals

Withholding Tax Rate

Generally speaking, the withholding tax rate on RIF payments and RRSP payments made to a non-resident in Canada is 25%. However, this rate can be reduced by virtue of a treaty between Canada and your country of residence.

Learn what you should consider before withdrawing funds from your RRSP’s.

Section 217 Tax Return

The withholding tax paid is generally the tax payer’s final obligation to the CRA. However, you can elect to file a tax return with the CRA under Section 217 of the Income Tax Act with the goal of getting some of your withholding taxes back. If the tax calculated, as per the section 217 return, is lower than the 25% withholding tax already deducted, then this return will be beneficial as the access will be refunded to you.

Want to know more about Section 217? We have all the information you need to know here.

Filing Due Date and Address

The section 217 tax return is due by June 30th of the following year. However, if there is a balance owing, it is recommended that you pay and file by April 30th to avoid interest from accruing. The return is filed with the International Tax Services Office.

Form NR5

Another way to reduce the non-resident withholding tax is to file form NR5 with the CRA. Based on the information contained in the NR5, the CRA will assess whether they can instruct the pair to reduce the withholding taxes taken off your payments. An approved NR5 form is valid for up to 5 taxation years. However, it requires you to file a section 217 tax return every year.

Form NR5 Filing Due Date and Address

Form NRA5 must be filed by October 1st of the year, or before the first payment is due to the International Tax Services Office.

Here’s the tip

If you are a non-resident of Canada and tired of paying high taxes on RIF and RRSP withdrawals, consider filing a section 217 tax return and NR5 form.

Disclaimer

The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting and financial professionals. Allan Madan and Madan Chartered Accountant will not be held liable for any problems that arise from the usage of the information provided on this page.

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Comments 4

  1. Hello, I’m a bit confused. I have a couple small RRSP’s (less than 100,000.) which are coming due.
    We are permanent alien residents of the USA for 27 years. Would like to draw some out but not sure what I am going to get into as far as taxes since we have not had to complete a return for this many years. any advice would be appericated.

    1. Hi Kevin,

      A withholding tax of 25% will be deducted from the withdrawals you make by your financial institution/brokerage. You can claim a foreign tax credit on your US return for the withholding tax deducted. You do not have to file a Canadian tax return to report the withdrawal.

  2. Hello
    I have moved back to Ireland, sold my house in Canada, and have no connection to Canada other than a bank account and RRSP’s. Can you please tell me what the tax implications of cashing in my RRSP’s as I thought the withholding tax was 15%.
    Regards
    Mary

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