Actually got 15% (not 30%) IRA withholding as Canadian non-US-person with Fidelity — anyone done this?

[vkg01]

I'm a Canadian resident, not a US citizen or green card holder, with a Traditional IRA at Fidelity from when I worked in the US. Looking for people who've actually gone through a withdrawal, not general advice.

What I Know So Far:
Fact 1 - Default withholding on IRA distributions to a foreign person is 30% (IRS Publication 515: https://www.irs.gov/publications/p515)
Fact2 - The Canada-US tax treaty reduces this to 15%, but only for "periodic" payments — nobody clearly defines what counts as periodic (IRS Publication 597: https://www.irs.gov/publications/p597,
Fact 3: US Canada Tax Treaty Doc see Article XVIII Pensions and Annuities: https://www.irs.gov/pub/irs-trty/canada.pdf)
Fact 4: Form W-8BEN is what you file with the custodian to claim the reduced rate If over withheld at 30%, you can recover it by filing Form 1040-NR

Questions for anyone who's actually done this:
- Did Fidelity apply 15% automatically, or did you have to push for it?
- Did you need recurring/scheduled distributions to qualify, or did a lump sum also get 15%?
- Does Fidelity have an internal threshold for what counts as "periodic"?

Real experiences only not looking for "talk to an accountant" replies (even though that's probably good advice too).

[vkg01]

vkg01 wrote:
> Fact 3: US Canada Tax Treaty Doc see Article XVIII Pensions and Annuities:
> https://www.irs.gov/pub/irs-trty/canada.pdf)
Forgot to mention the page number of this doc see page 24

[nelsona]

The reason that firms are deciding to withhold 30% is legitimate. It is because, unlike Canada, the US does not have an clear definition of PERIODIC, and as the treaty wording points out, only PERIODIC pension payments are granted the 15% withholding status.

That said, the IRS usually accepts the 15% for ANY IRA/401(k) paid to a CDN on the 1040NR as NEC income (in fact, by reporting it as CONNECTED income, the final rate can be even lower.

The frustration is that if the IRS in the end accepts 15%, why do the not simply make this a blanket statement for all firms to use.

[vkg01]

Hello Nelsona,
Thank you for your reply.
I have some great news! Yesterday, I received a follow-up call from a Vice-President and Financial Consultant at Charles Schwab’s International Branch in Miami. He has specialized exclusively in international clients for the past decade and provided some very helpful clarity. He confirmed that as long as you do not make a total lump-sum liquidation (meaning you don't take everything out at once), the withholding tax rate is 15%. You can make multiple withdrawals of varying amounts throughout the year, and it will still qualify for the 15% rate.
He is perfectly fine with me sharing his direct contact details, so please if some one needs it please let me know.

As I said I am with fidelity atm but some time soon in near future I plan to work with guy.

Thank you
~vkg