RRSP Collapse - Non-Resident 25% Flat Tax

bbradyc5 · Post by **bbradyc5** » Mon Feb 20, 2006 8:52 pm

Can someone please guide me to the Canada Revenue website or list what section of the tax act states that when a person becomes a non-resident of Canada and collapses their RRSP, they are only responsible for a flat 25% tax and are not required to report this on their Canadian income tax return. My brother-in law who is a CA designation in Canada, insists that this 25% is only a withholding tax. I will be moving to the US shortly and plan to collapse my RRSP as soon as I do to use as a new house downpayment and now he has me worried. Thanks for any help!

nelsona · Post by **nelsona** » Tue Feb 21, 2006 7:56 am

Look for Non-resident tax on the CRA website.

better yet have your brother-in-law look it up.

Rickerbucks · Post by **Rickerbucks** » Wed Feb 22, 2006 2:54 pm

I'd agree with nelsona and not your brother-in-law.

Of course this is assuming you make the RSP dereg in the year AFTER you have moved.

Thu Feb 23, 2006 7:30 am

As a non resident of Canada, the 25% withholding tax is your only obligation to Canada respecting the withdrawal of your RRSP funds. You may be entitled to file a Sec 217 return to recover all or part of this tax, however, if your world income is low.

CRA uses world income to calculate the tax which would be payable in Canada on a Sec 217 return, to determine if your 25% withholding would have been too much tax.. and they will refund you the balance.

Depending upon where you live, however, the RRSP withdrawal can be fully taxable to you in your home country.