US non-resident gRRIF minimum distrubution tax withhold

[bostonrob5]

I am a non-resident in the US for 25 years. I converted my employment RRSP to a group RRIF last year - about 200k. This year I am 71 and am taking my minimum distribution.
I understand the minimum distribution is about 5%, but I could take up to 10% of the account and have 15% tax withheld. Any amount above 10% would have 25% withhold.
However, the administrator of the plan told me that the first 5% distribution has no Canada withholding tax(!). If I make a larger withdrawal, it has a 15% withholding tax. And there is no upper limit - I could withdraw the entire amount and have a 15% withholding tax on everything after the first withhold tax-free 5%(!). He checked and confirmed this with several colleagues and several supervisors.
However, I spoke with the CRA International tax and non-resident withholding accounts office. As far as she knew ANY withdrawal would be considered a lump sum and have a 25% tax withhold(!). However, she admitted she knew nothing about the minimum distribution schedule after age 70 or different rules for group vs individual plans. I would have to send a letter to the International tax office to try to get clarification. And if I proceed with the administrator's advice, I would be liable for the tax, interest and possibly a penalty.

Is there a better way to handle this?
Thanks.

[nelsona]

The problem is that your admin doesn't know the rules for US residents (or non-residents in general). He seems to be applying the rules for residents.

Never trust a CRA telephlunkie either, they are wrong half the time, and incorrect the other half. At least she admitted this. The 25% applies only to RRSPs (regardless of age or amount), or RRIF withdrawals that exceed the definition of periodic, which is as you described above (twice your minimum or 10% whichever is GREATER, based on the FMV at the beginning of the year).

The one caveat is that in the FIRST YEAR you create a RRIF, the beginning of year value is ZERO, thus you cannot take 10% of ZERO at the 15% rate. That is also why you are not required to take a withdrawal in the year you create a RRIF, that applies to residents or non-residents. I have seen that part unevenly appied from broker to broker. This doesn't apply in your case, since you correctly created the RRIF last year and are taking your first distribution this year.

So, you need to have this firm get some education about RRIF payments to non-residents. sounds like this may be a small time operation (?). TD Direct works fine with under these parameters.

In the meantime, just know your obligations to CRA: If you want to pay (either through withholding, or by having to send CRA a check to correct the problem -- that will be how to fix it) just make sure you take out between the minimum and 10%.
Use 15% as your tax credit for form 1116, since that will be the final CRA tax when all is said and done. The withdrawals are 100% taxable in US, since this was an employer-sponsored plan.

And in years when you may want to take more than 10%, make sure you first with draw the 10% 9supposed to be withheld 15%), and then withdraw the extra on separate transaction (supposed to be withheld 25%).

There is no difference in the CRA treatment if this is a group plan or a private one.

I would not worry too much about CRA interest and penalties. Ultimately, when a Cdn payor (your group RRSP) under withholds tax from a non-resident THEY are the ones liable to any penalties and interest (even tax if you dug your heels in). that is why is should be very important to them that they get this correct. But since I assume you want to keep your relationship with this plan (you don't have to of course, you can move your account)you will ultimately pay the correct 15% eventually.

If you write to CRA INt'l, please the tax treaty definition document (ITCIA section 5)that I have referenced on several posts.