Advice on IRA to RRSP move

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unblessed_turnip
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Joined: Tue Aug 14, 2018 4:32 pm

Advice on IRA to RRSP move

Post by unblessed_turnip »

I would like some advice on moving US retirement accounts to Canada. I am a Canadian Citizen who lived in the US for 5 years. I have a green card (still do but planning on abandoning) but moved back to Canada permanently at the end of 2017. I have a rollover IRA with Fidelity Investments in the US that I would like to move to an RRSP in Canada. I read that this can be done, utilizing tax treaties to minimize the tax burden. When I spoke to Fidelity about the idea, they told me they would withhold 30% because I am not a US citizen, and the IRS would take an additional 10% as an early withdrawal penalty (which I am okay with). When I mentioned the W8-BEN form for the treaty, Fidelity said it was their policy to treat citizens of every country the same and withhold the 30% (regardless of tax treaties??) The problem is that given the US-Canada tax treaty, I read that I should be able to get a 20-15% withhold rate, not 30%.

Should I try to move my IRA account to an administrator that will honor the 15-20% withholding rate that the US-Canada tax treaty allows?
nelsona
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Joined: Wed Oct 27, 2004 2:33 pm
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Re: Advice on IRA to RRSP move

Post by nelsona »

The withholding doesn't really matter in the end, since you will get it back when you file. The problem is that to make this work, you need (a) cash to make up the withholding, and (b) sufficient Cdn income to balance the US income from the IRA withdrawal.

Most institutions, even if they follow the treaty will not view taking the entire IRA as "periodic" so will withhold 30% plus 10%. Even if one were to withhold only the 15% plus 10%, you still need to come up with cash.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
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