Witholding tax
Jan 30th 2010, 7:43 pm
#1
Just Joined
Thread Starter
Joined: Jan 2010
Posts: 9
Witholding tax
We are all set to move back yo UK...We thought! BUT just found out that the money we were going to use to buy property there is subject to %30 witholding tax in Canada. 
The money is tied up in RRSP's anyone found a way around it? We certainly would lose enough money that we could not possibly purchase home in UK So dissapointed!
Thanks for any advice,
Maureen
The money is tied up in RRSP's anyone found a way around it? We certainly would lose enough money that we could not possibly purchase home in UK So dissapointed!Thanks for any advice,
Maureen
Jan 31st 2010, 12:16 am
#2
Retired
Joined: Apr 2004
Posts: 34,649
Re: Witholding tax
So the question becomes, what are the rules for early withdrawal from RRSP.
Jan 31st 2010, 12:30 am
#3
BE Forum Addict
Joined: Mar 2009
Posts: 1,289
Re: Witholding tax
Looks like early withdrawal always incurs the withholding tax.
Jan 31st 2010, 2:03 am
#4
Joined: Sep 2008
Posts: 12,830
Re: Witholding tax
It's all in here http://www.cra-arc.gc.ca/tx/ndvdls/t.../menu-eng.html
Any tax owing or to be refunded gets sorted out at tax time. Withdrawal from an RRSP will almost always incur tax, as it is untaxed income and consequently added to your income in the year of withdrawal. How much depends on your total annual income. Withdrawing in years when you have low income can be the most advantageous. Withholding tax is in place so you don't take it out and do a runner before CRA get their slice.
If you withdraw it as a non resident, i.e you have already left the country, may have different implications. This may apply http://www.cra-arc.gc.ca/E/pub/tp/ic...c76-12r6-e.pdf
The witholding tax is 25% I believe if you are a non resident in a country that has a tax treaty with Canada. As far as I know it is taxable wherever you live. You would be best advised to consult an accountant to be sure.
Although withholding tax is 30% for residents, if the withdrawal pushes your income into a higher tax bracket you may have to pay more than 30%.
This is not professional advice, it may be a load of tosh. Talk to an accountant to be sure of the implications of taking money out of your RRSP.
Any tax owing or to be refunded gets sorted out at tax time. Withdrawal from an RRSP will almost always incur tax, as it is untaxed income and consequently added to your income in the year of withdrawal. How much depends on your total annual income. Withdrawing in years when you have low income can be the most advantageous. Withholding tax is in place so you don't take it out and do a runner before CRA get their slice.
If you withdraw it as a non resident, i.e you have already left the country, may have different implications. This may apply http://www.cra-arc.gc.ca/E/pub/tp/ic...c76-12r6-e.pdf
The witholding tax is 25% I believe if you are a non resident in a country that has a tax treaty with Canada. As far as I know it is taxable wherever you live. You would be best advised to consult an accountant to be sure.
Although withholding tax is 30% for residents, if the withdrawal pushes your income into a higher tax bracket you may have to pay more than 30%.
This is not professional advice, it may be a load of tosh. Talk to an accountant to be sure of the implications of taking money out of your RRSP.
Last edited by Aviator; Jan 31st 2010 at 2:18 am.
Jan 31st 2010, 5:08 pm
#5
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Joined: Sep 2004
Location: Flat Oxfordshire
Posts: 1,709
Re: Witholding tax
Witholding tax when leaving Canada can be a bit of a minefield. Depending upon your income though, the tax on early RRSP redemption doesn't seem that unfair since the fund is from untaxed income. From what I can understand, if you are paying higher rate in the UK and the fund value allows you to, you can actally be better off if you are able to pay it into a UK fund.
If you are selling a property, watch out for the tax withholding issue there. Do anything that you can to make sure that you are resident in Canada on the day that you sell the property otherwise you will be subject to a tax withholding (rather than a withholding tax) to make sure that CRA gets any tax due to capital gains. This can take a long time to get back (over a year). When you choose a lawyer to handle the sale make sure that they fully understand the regulations relating to this tax witholding. It is not uncommon for lawyers to try and protect their butts by claiming the TWP holders are not classified as resident or that because you are leaving Canada that they must remit this tax withholding to CRA. Both are untrue as was confirmed to us and my lawyer by a senior CRA officer.
If you are selling a property, watch out for the tax withholding issue there. Do anything that you can to make sure that you are resident in Canada on the day that you sell the property otherwise you will be subject to a tax withholding (rather than a withholding tax) to make sure that CRA gets any tax due to capital gains. This can take a long time to get back (over a year). When you choose a lawyer to handle the sale make sure that they fully understand the regulations relating to this tax witholding. It is not uncommon for lawyers to try and protect their butts by claiming the TWP holders are not classified as resident or that because you are leaving Canada that they must remit this tax withholding to CRA. Both are untrue as was confirmed to us and my lawyer by a senior CRA officer.
Jan 31st 2010, 5:33 pm
#6
Just Joined
Thread Starter
Joined: Jan 2010
Posts: 9
Re: Witholding tax
Witholding tax when leaving Canada can be a bit of a minefield. Depending upon your income though, the tax on early RRSP redemption doesn't seem that unfair since the fund is from untaxed income. From what I can understand, if you are paying higher rate in the UK and the fund value allows you to, you can actally be better off if you are able to pay it into a UK fund.
If you are selling a property, watch out for the tax withholding issue there. Do anything that you can to make sure that you are resident in Canada on the day that you sell the property otherwise you will be subject to a tax withholding (rather than a withholding tax) to make sure that CRA gets any tax due to capital gains. This can take a long time to get back (over a year). When you choose a lawyer to handle the sale make sure that they fully understand the regulations relating to this tax witholding. It is not uncommon for lawyers to try and protect their butts by claiming the TWP holders are not classified as resident or that because you are leaving Canada that they must remit this tax withholding to CRA. Both are untrue as was confirmed to us and my lawyer by a senior CRA officer.
If you are selling a property, watch out for the tax withholding issue there. Do anything that you can to make sure that you are resident in Canada on the day that you sell the property otherwise you will be subject to a tax withholding (rather than a withholding tax) to make sure that CRA gets any tax due to capital gains. This can take a long time to get back (over a year). When you choose a lawyer to handle the sale make sure that they fully understand the regulations relating to this tax witholding. It is not uncommon for lawyers to try and protect their butts by claiming the TWP holders are not classified as resident or that because you are leaving Canada that they must remit this tax withholding to CRA. Both are untrue as was confirmed to us and my lawyer by a senior CRA officer.
Maureen
