Canadian on TN Visa going to USA - RRSP Tax Strategy

[avatar]

Hello,

I've been reading almost all posts regarding RRSP and the best course of actions in order to minimize tax. I will be moving from Quebec to California in ~March.

Questions are:

1. If I convert to RIFF before leaving, I will be able to withdraw at 15% tax instead of 25%. I read everyone that RIFF requires retiring 10% minimum but no maximum. Treaty says "periodic pension payment". Can I decide that my period is 2 months and be done with it ? That sounds like a major loop-hole. Even I decide that I am right, CRA/IRS will probably think otherwise. Would 2 years be considered periodic ?
Source of info: http://www.ica.bc.ca/kb.php3?pageid=495 ... 9723cb0db3

2. Retiring from RRSP (25%) or RIFF (15%) generate massive foreign tax credits. Has anyone figured out a way to use the excess once you become non-resident ? Is there any tricks ?

3. I own a registered personal corporation in Canada (Quebec). Can I continue legally working on it once I'm in the USA on a TN Visa ?

4. Should I contribute to Fonds RRSP (FTQ) before leaving ? They generate an additional 30% tax shelter. Will I lose this upgrade upon cashing out my RRSP in the USA ? Source: http://www.fondsftq.com/en/reer/pourquo ... fonds.aspx

Thanks !

[nelsona]

1. you are misunderstanding. If you convert to RRIF, you must take minumim withdrawals (likely 2-3%) but can take as much as you want above that. HOWEVER, the 15% tax is only on the FIRST 10% you withdraw every year, not the whole amount. 10% per year is the definition of periodic that CRA goes by in a RRIF.

2. The best "trick" I know is to go and work in Canada for your US firm for a few weeks if you can. This is considered foreign source income, and not taxable in Canada. So you are simply taking some of your salary and using it n form 1116. Both RRSP and wages are general limit income.

3. Not really. You are only allowed to work for TN sponsors.

4. You likely need to keep those funds in FTQ for a specified period before removing them. You will have time if you use the

[avatar]

1. So converting to RRIF and retiring everything in a lump sum will result in net taxation of 10% * 15% + 90% * 25% = 24%. Not much but could be worth while if your RRSP is large and you are ready to go through the trouble.

[nelsona]

Well that 15% rate would only kick-in the year AFTER you make the RRIF, and the firm MUST withhold correctly on the first 10%.

I would say NOT worth the trouble, because by then, some of your RRIF has become taxable in US and state which will take care of the 1% tax savings.

Go this route if you are planning to take 10% a year, not what you are planning.