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Old Oct 7th 2017, 12:58 am   #1
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Default RRSP in my dotage living in UK

So I have started a RRSP and wondered how this will work when I return to UK on retirement. I understand I will pay tax but living in UK, I should only be paying tax in UK.....this may mean that when they deduct tax when I make a withdrawal in Canada...IT MAY BECOME COMPLICATED..anyone know anything about this stuff? Thanks.
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Old Oct 7th 2017, 2:43 pm   #2
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Default Re: RRSP in my dotage living in UK

There will be a withholding tax deducted (I believe it is 25%). You then file your taxes is the UK and you will be given a credit for any tax you paid to Canada. Canada will not reimburse you for the tax you paid in Canada unless you file a return in Canada which you won't.

Canada's argument will be that you received a tax break when you made contributions but, essentially, it means that, if you don't live in Canada during your retirement, you pay a large financial cost for doing so.
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Old Oct 7th 2017, 2:59 pm   #3
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Default Re: RRSP in my dotage living in UK

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Originally Posted by Almost Canadian View Post
There will be a withholding tax deducted (I believe it is 25%). You then file your taxes is the UK and you will be given a credit for any tax you paid to Canada. .... if you don't live in Canada during your retirement, you pay a large financial cost for doing so.
Why? If you get credit in the UK for tax paid in Canada, where is the incremental cost for living outside of Canada?
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Old Oct 7th 2017, 3:59 pm   #4
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Default Re: RRSP in my dotage living in UK

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Originally Posted by Yorkiechef View Post
So I have started a RRSP and wondered how this will work when I return to UK on retirement. I understand I will pay tax but living in UK, I should only be paying tax in UK.....this may mean that when they deduct tax when I make a withdrawal in Canada...IT MAY BECOME COMPLICATED..anyone know anything about this stuff? Thanks.
I had an RRSP in Canada, which I converted to an RRIF prior to my move to England a couple of years ago. This conversion is the essential point. All RRSPs have to be converted to an RRIF at some point, at which time you have to make scheduled drawdowns-dependent on age. Unless of course you collapse you RRSP before moving to England.


Of course you may decide to stay in Canada.

Drawdowns are treated as a pension by the UK/Canadian tax authorities under a treaty. No taxes on the monthly drawdowns are withheld by Canada, but liable to taxes as income by HMRC. However, if a sum is withdrawn from the RRIF that exceeds the mandated drawdown, withholding taxes are exacted in Canada, (there is a CRA table showing percentage amounts). Possibly capital gains taxes will be exacted by HMRC.

There is some paperwork required by Canada and HMRC, but not complicated. Both agencies have loads of online information.

The current situation viz-a-viz GBP/CAN dollar has been advantageous-a significant gain on my monthly RRIF pension £ payments from Canada over what I expected back in 2015, although how long this will last is any ones guess.

I also have a TFSA from which I get monthly dividends, taxable as income in the UK, but not too onerous, and HMRC does allow a foreign dividend tax credit.

I maxed out my RRSP contributions, CPP, and TFSA, and am I glad I did, all these years later.
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Old Oct 7th 2017, 7:16 pm   #5
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Default Re: RRSP in my dotage living in UK

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Originally Posted by Pulaski View Post
Why? If you get credit in the UK for tax paid in Canada, where is the incremental cost for living outside of Canada?
That is only helpful if your marginal tax rate is higher than 25% in England.


For example, withdrawing $20,000 a year from the RRSP if living in Canada would not likely incur 25% tax. In the UK it definitely will.
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Old Oct 7th 2017, 7:26 pm   #6
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Default Re: RRSP in my dotage living in UK

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Originally Posted by Almost Canadian View Post
That is only helpful if your marginal tax rate is higher than 25% in England. ....
Dave, above, said "No taxes on the monthly drawdowns are withheld by Canada, ...."

Comment?
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Old Oct 7th 2017, 9:51 pm   #7
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Default Re: RRSP in my dotage living in UK

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Originally Posted by Pulaski View Post
Dave, above, said "No taxes on the monthly drawdowns are withheld by Canada, ...."

Comment?
I believe he was talking about RRIFs. I was talking about RRSPs, as was the OP.

If I am honest, I don't fully understand the difference between the two, being a fair way away from retirement. I get that, at a certain age, one has to turn one's RRSP into a RRIF but I don't know when that must occur or what happens afterwards.

Hopefully, someone with expertise will be along soon.
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Old Oct 8th 2017, 3:15 am   #8
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Default Re: RRSP in my dotage living in UK

D, we can only hope! Very confusing subject that I would have thought many will have to negotiate at some point.
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Old Oct 8th 2017, 12:05 pm   #9
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Default Re: RRSP in my dotage living in UK

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Originally Posted by Almost Canadian View Post
I believe he was talking about RRIFs. I was talking about RRSPs, as was the OP.

If I am honest, I don't fully understand the difference between the two, being a fair way away from retirement. I get that, at a certain age, one has to turn one's RRSP into a RRIF but I don't know when that must occur or what happens afterwards.

Hopefully, someone with expertise will be along soon.
This wiki has a pretty clear explanation, including the switch to an RRIF (see under the Withdrawals heading), which must occur no later than when you reach 71, and the main effect appears to be triggering mandatory minimum annual distributions.
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Old Oct 8th 2017, 3:12 pm   #10
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Default Re: RRSP in my dotage living in UK

Well my RRIF is certainly taxed at source by Canada, so I don’t understand the “NO TAX” comment.
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Old Oct 8th 2017, 3:23 pm   #11
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Default Re: RRSP in my dotage living in UK

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Well my RRIF is certainly taxed at source by Canada, so I don’t understand the “NO TAX” comment.
But should it be?

Typically (other countries such as the UK and US), the default is "withhold tax", and you have to tell the investment manager that you are overseas and not liable for local taxes by completing the appropriate tax form.

Now the investment manager can show the tax authorites that the local mandatory requirement to withhold tax, doesn't apply because the beneficiary is not liable for in-country taxes.
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Old Oct 12th 2017, 1:40 am   #12
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Default Re: RRSP in my dotage living in UK

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I also have a TFSA from which I get monthly dividends, taxable as income in the UK, but not too onerous, and HMRC does allow a foreign dividend tax credit.
But how can you claim a tax credit, because by definition there is no Canadian tax? There's nothing to claim a credit against.

There's no point to a TFSA if you move abroad, because there are no reciprocal agreements so it will be taxed in jurisdiction X.

Because the taxation method is different I didn't think there was a point to holding an RRSP/RRIF in the UK but you make a good point about converting it into an RRIF, which essentially eliminates the Canadian tax. So at that point it's much like a SIPP, UK income tax on drawdowns.

https://www.gov.uk/hmrc-internal-man...-relief/dt4617
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Old Oct 12th 2017, 1:49 am   #13
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Default Re: RRSP in my dotage living in UK

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Originally Posted by Pulaski View Post
But should it be?
Canada has a 25% non-resident withholding tax on withdrawals unless it's reduced by a treaty, it's designed to stop people from avoiding Canadian income tax by moving abroad. Because they benefitted from a tax credit while contributing, they have to pay tax on withdrawals after moving abroad. Because they no longer file a Canadian income tax return there is a non-resident tax.

In Canada there is withholding on RRSP withdrawals, but it's lower because it's subject to income tax and the idea is to stop people ending up with a massive tax bill at tax time, but with non-residents they have to pay the full whack (i.e. 25%) when the withdrawal is made.

The treaty rate for the US is 15% but for the UK it's 0% provided it's periodic and not over a certain amount as the previous poster described, but only once it's a RRIF because at that point it is a pension.
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Old Oct 12th 2017, 1:51 am   #14
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Default Re: RRSP in my dotage living in UK

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Well my RRIF is certainly taxed at source by Canada, so I don’t understand the “NO TAX” comment.
But are you in the UK? This guy isn't going to be getting a T4RIF, he'll get an NR4 with no withholding.
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Old Oct 13th 2017, 3:38 pm   #15
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Default Re: RRSP in my dotage living in UK

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Originally Posted by Steve_ View Post
But how can you claim a tax credit, because by definition there is no Canadian tax? There's nothing to claim a credit against.

There's no point to a TFSA if you move abroad, because there are no reciprocal agreements so it will be taxed in jurisdiction X.

Because the taxation method is different I didn't think there was a point to holding an RRSP/RRIF in the UK but you make a good point about converting it into an RRIF, which essentially eliminates the Canadian tax. So at that point it's much like a SIPP, UK income tax on drawdowns.

https://www.gov.uk/hmrc-internal-man...-relief/dt4617
HMRC allows relief against tax payable in the UK against foreign dividends. Perhaps I should have phrased my comment differently.

Had I collapsed my TFSA before leaving Canada I would have paid no income tax on it in Canada. However, my TFSA is part of a long term investment plan which includes the possibility of me returning to Canada. Currently I get income from the TFSA, taxed at a very small percentage, and as long as the TFSA is maintained in Canada, no capital gains taxes are payable in the UK.

Before I left Canada I had an actuary make an independent assessment of my income in the UK from my Canadian assets-TFSA, RRIF, CPP, and corporate investments. Leaving everything in Canada met a major goal-maximum flexibility with minimum taxes.
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