Michigan resident- Canadian Citizen with US Variable

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Dear Sir/Madame:
I have a Michigan broker who has Canadian clients (residing in Michigan)
that were recently sold an annuity. This morning he received a memo from
his back office that they are not allowed to sell VAs to Canadian citizens
because "Canadian citizens who own annuities are penalized 15% upon
redemption and cannot realize a tax deferred advantage". I was trying to
figure out if that was a correct statement. The broker was under the
impression that there was a 15% mandatory withholding tax deferred until
the client receives a distribution. Can you kindly verify which statement
is in fact correct.
Thanking you in advance for your assistance.
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david ingram replies:
I am always willing to be proved wrong but there are no differences in tax on a variable annuity for a citizen of the United States or a citizen of Canada if they both live in the United States and there is no difference if they both move to Canada.
In the future both countries will tax the withdrawal in full.  At this time, the US resident will pay tax on their US federal and state marginal tax brackets and the Canadian resident will have 15% tax paid to the US and then have to pay the Canadian Marginal tax to Canada.  Canada will give a foreign tax credit which should be dollar for dollar equal to the tax paid to the US.
Does anyone else have a different answer.  If so, I will be glad to pass it on with credit.
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