Hey Guys

So. Just want to make sure im right with regards to tax

I know all the implications for HMRC and the penalties for withdrawals & QROPS

I need to know about the Canadian Tax implications!!!

I know about the Home Buyers Plan and that we can withdraw up to $25k each,

If not taking under the "HBP" are we also charged a Canadian tax of 30% for the withdrawal and a 5.2% fee for a deferred sales charge?

Tax is so confusing!!

Please Help

Depending on the amount you withdraw the RRSP administrator will withhold a percentage of the withdrawal and pay it to the CRA. 30% is the top withholding rate for withdrawals > $15,000. When you complete your tax return you add the gross withdrawal to your income and deduct the amount withheld from the tax due. As a result you may have an additional amount due or a refund. Most likely an additional amount due .

I don't know what the deferred sales charge is. I have not heard that in connection with tax. Is it a fee the pension fund charges, like a bid to offer spread?

Sounds like a fee for the early sale of a mutual fund. Usually the fee decreases the longer you hold. Of course depending on the Mutual fund fee it could be better just to take the hit because of the fees they charge anyway.

However that's a whole different can of worms.

An RRSP is a deferred income tax savings plan, i.e. when you make a withdrawal you are charged income tax on that amount. You avoided income tax on that amount by putting it in the RRSP in the first place. The logic being that the money can be used without taxation, for investments inside the RRSP (therefore increasing the money multiplier effect) and when you retire and start using the money, you will be in a lower income tax bracket so you pay less income tax on the money from the RRSP.

If you withdraw it, then there is a withholding tax based on the amount withdrawn, the top rate being 30%, but that's just a withholding tax, the amount of money withdrawn goes on top of your income so the actual tax bill you will pay is based on your income plus the amount of the withdrawal. You can use a tax calculator to get a rough idea. If you're unemployed, likely the CRA will owe you some money, but if you're earning you may owe them some money on top of the 30%. Depends on your circumstances.

Thanks for your help everyone

Did you mention that this RRSP is a QROPS? If so, it would be a VERY bad idea to withdraw any money from it if you are under 55 years old and still within the test period. You'll end up losing most of the withdrawal to taxes and penalties that HMRC charges, in addition to any taxes and fees payable in Canada.

Please double-check with your financial advisor on this. If they don't know anything about "test periods" and "unauthorized payments" from QROPS, then they should not be managing your QROPS. Find someone with expertise in this area to help you.

Let me know if you have any questions. Good luck!