Hi,
I'd like to get a word of advice on the following.
Back in April 2001 I was transfered by my employer from Ontario to US. For the first three months of 2001 I still worked in Canada and then in 2002 filed the taxes for the very last time. When we moved (with my wife) we liquidated all our assets except for the bank accounts. She had a small balance of RRSP loan which we paid off shortly after and I have a Locked-In RRSP account. Since we moved we had no canadian income, dividents, etc. Now 18 years later I'm trying to close on that RRSP account that has been sitting without growing and when contacted the bank (account holder) I was told that I need to file N73 form in order to determine my residency. Once I'm confirmed a non-resident the account will be released and closed. As per CRA I have to be a non resident for 2 years. I'm still under 55 so either way I cannot do anything about it. Would it be better to wait another 5 years and then close that account but... then that would be considered as a taxable income in Canada and I would have to file income tax... correct?
The question I have is... are there any complications that I'm facing with CRA by filing N73? Is there anything I should be aware of or somethign that can deny my non resident status? We're both green card residents with US born kids and in process for US citizenship.
Your comments and advise is greatly appreciated.
Locked-In RRSP
Moderator: Mark T Serbinski CA CPA
Re: Locked-In RRSP
You do not need to wait until 55 to collapse a LIRA if you are non-resident, which is the reason for the NR73.
The entire withdrawal will be taxable in both Canada (25% withheld) and US (as pension) with credit given for the Cdn tax.
The entire withdrawal will be taxable in both Canada (25% withheld) and US (as pension) with credit given for the Cdn tax.
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Re: Locked-In RRSP
You are undeniably a non-resident so I would not worry about that. You won't have to file a Cdn tax return, as the 25% tax is final.
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Re: Locked-In RRSP
I have a similar but slightly different situation. I am a dual citizen U.S. resident (therefore non-resident to Canada) with two RRSP accounts in Ontario. One is a Locked-in RRSP. I intend to unlock this account and directly transfer the entire balance to the other (non locked-in) RRSP without any cash distribution. My objective is to combine the two accounts. I have three questions about this:
1. Is there any tax withholding in Canada for unlocking the Locked-in RRSP?
2. Is there any tax withholding in Canada for the direct balance transfer to the other RRSP?
3. Under the U.S. / Canada Tax Convention, does the U.S. follow Canadian taxability for these two events?
I am aware of the process to unlock and transfer the assets, I just don’t want to trigger a tax event.
Thanks.
1. Is there any tax withholding in Canada for unlocking the Locked-in RRSP?
2. Is there any tax withholding in Canada for the direct balance transfer to the other RRSP?
3. Under the U.S. / Canada Tax Convention, does the U.S. follow Canadian taxability for these two events?
I am aware of the process to unlock and transfer the assets, I just don’t want to trigger a tax event.
Thanks.
Re: Locked-In RRSP
1/2. Not if the transfer is a direct transfer.
3. Yes. Your RRSP will only be taxable when you take distributions.
3. Yes. Your RRSP will only be taxable when you take distributions.
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Re: Locked-In RRSP
Filing the N73 form to confirm your non-resident status with CRA sounds like the right move to close your RRSP account without Canadian tax issues later on. Just make sure your paperwork is thorough and consider consulting a tax advisor familiar with international tax laws for peace of mind.
Re: Locked-In RRSP
Unless requested by CRA, one should generally NOT file NR73. However, in some provinces, to unlock a LIRA (never an RRSP), one must file an NR73 to prove non-residency. You would need to check the requirements for the jurisdiction which b=governs your LIRA.
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