Hello, Mr. Ingram,
I was planning to withdraw my RRSP because it is not making that much money
in Canada. I have other investment ideas and I can use the money here in
the US. As per you info, the tax withheld is 25%. TD will be charging me
30% as the RRSP value is over $15,000. TD is also saying that I have to
claim the funds withdrawn as income for 2007. I thought I do not need to
file a Canadian Income Tax. I also thought that I only need to declare in
my US tax return the meager RRSP earning from the date that I left Canada
(May 2003) to the time that I withdraw the RRSP.
Your thoughts, please.
>From: [email protected]
>Subject: Re: Withdrawing RRSP
>Date: Sun, 18 Feb 2007 09:30:59 -0500
>I appreciate your interest in redeeming from your RSP account. Thank you
>for taking the time to write.
>There is some important information that you should be aware of when
>considering a redemption from your RSP. If your RSP has been open for less
>than 6 months, the fee is $100.00 per withdrawal. For RRSPs opened more
>than 6 months, the fee is $50.00 per withdrawal. This is not related to
>the funds that you hold, but is only based on the age of the RSP account.
>Depending on how much you withdraw from your RSP, the withholding tax will
>vary. The Withholding Tax for all Provinces except Quebec is as follows:
>Withholding Tax Rate Gross Withdrawal
>10% Up to $5,000
>20% Between $5,000 and $15,000
>30% $15,000.01 and over
>We would recommend that you exhaust all other avenues of finance prior to
>making a decision to redeem from your RSP, as your RSP is designed for
>retirement purposes and the fees and taxes may make it less attractive to
>withdrawal. You'll also have to claim the funds withdrawn as income for
>the current year.
>Please note as well that all RSP redemptions must be claimed on your
>income tax as part of your income.
>If you do need to complete a redemption, you can do so by calling EasyLine
>at 1-866-222-3456, available 24 hours everyday, and request the redemption
>through a representative. They would be happy to help.
>Concerning your tax related questions and statement, I'd recommend that
>you also contact the Canada Revenue Agency for further assistance:
>I hope this direction is helpful. Thank you once again for writing.
>Internet Correspondence Representative
>TD Canada Trust 1-866-222-3456
>Email: [email protected]
>TDD (Telephone Device for the Deaf) 1-800-361-1180 (toll free)
>This email is directed to, and intended for the exclusive use of, the
>addressee indicated above. TD Canada Trust endeavours to provide accurate
>and up-to-date information relating to its products and services. However,
>please note that rates, fees and information are subject to change.
david ingram replies:
As a non-resident of Canada, the withholding on your RRSP is 25% of the gross withdrawal whether you take out $5,000 or $500,000. The Canada Trust directive you received is in error about the withholding rate but I expect it is a form letter and does not reflect your non-resident status.
The Canada Trust directive is also in error about the necessity to file a Canadian return for the same reason. When the 25% is withheld, Canada Trust should issue a T4RSP-NR showing the gross withdrawal and the 25% withholding.
This is the end of your tax filing responsibility to Canada unless the CRA specifically asked you for a world wide income statement which they can do. If they were to make such a request, you would report your world wide income and deduct it all on Line 256 of the T1 under Article IV of the US/Canada Income Tax Convention (Treaty).
For the US, the amount that is taxable on your US 1040 and your New Jersey or New York tax return is the difference between the RRSP's value on the day you left Canada and the day you cash it in.
Against that profit, you will be able to claim the pro-rata basis of the 25% tax paid to Canada as a foreign tax credit on form 1116.
CEN-TA Cross Border Services - Tax, Visas, Immigration