This may be an old question but here goes. Ex-pats living in Texas for 30+ years. Dual U.S. - Canadian citizens. Wanting to start taking lump RRSP withdrawals this year. Was told the bank withholds 15% NRT. Then I heard that if we file a Form NR5 we can apply to have that rate reduced. At the end of the year we would have to file a Form 5013, which appears to be a T1 for Non Residents. Is that correct? What else do we need to know?
We both collect CPP and OAS but no taxes are withheld. Is that correct? (They know we are non-residents.) The NR5 wants to know what our CPP and OAS payments will be - is that a trigger for "them" to start taxing those?
Regardless, it appears that we're going to have to start filing Form 1116 in the U.,S. for foreign taxes paid.
Non-Resident Tax on RRSP Lump Sum Withdrawals
Moderator: Mark T Serbinski CA CPA
Not quite correct, but pretty close
First, to qualify for 15% NR tax, your RRSP must have been converted to a a RRIF. Otherwise, unless you have a NR5 on file, the withholding will be 25%.
Regardless of the amount withheld, you can always file section 217 return on the Non-resident return. This will result in them taxing your RRSP or RRIF withdrawal "as if" you lived in canada. if it results in a lower tax than the 25% or 15% that was withheld, you will get a refund. if it is more, you simply don't file.
The reason the NR5 is asking for your other income, is that NR5 and the 217 election require that they use your world income to determine the taxrate that you will eventually pay (you won't actually pay Cdn tax on the OAS and CPP, but it will be used to come up with the effective tax on your RRSP/RRIF withdrawal). You need to include ALL your world income in order to determine this, not just CPP/OAS.
So, forst you need to convert your RRSP to a RRIF. Thias willensure that you pay no more than 15% Cdn tax on your RRIF withdrawals (your lump-sums can only be 10% or less of the RRIF value.).
For US tax, you will be taxable on the growth of your RRSP since you moved, so you need to have tracked that at the time (otherwise simply report it all). Then you will have to use 1116 to get credit for whatever Cdn tax you end up paying.
I trust you have been filing all the required RRSP paperwork ofver the last 20 years?
First, to qualify for 15% NR tax, your RRSP must have been converted to a a RRIF. Otherwise, unless you have a NR5 on file, the withholding will be 25%.
Regardless of the amount withheld, you can always file section 217 return on the Non-resident return. This will result in them taxing your RRSP or RRIF withdrawal "as if" you lived in canada. if it results in a lower tax than the 25% or 15% that was withheld, you will get a refund. if it is more, you simply don't file.
The reason the NR5 is asking for your other income, is that NR5 and the 217 election require that they use your world income to determine the taxrate that you will eventually pay (you won't actually pay Cdn tax on the OAS and CPP, but it will be used to come up with the effective tax on your RRSP/RRIF withdrawal). You need to include ALL your world income in order to determine this, not just CPP/OAS.
So, forst you need to convert your RRSP to a RRIF. Thias willensure that you pay no more than 15% Cdn tax on your RRIF withdrawals (your lump-sums can only be 10% or less of the RRIF value.).
For US tax, you will be taxable on the growth of your RRSP since you moved, so you need to have tracked that at the time (otherwise simply report it all). Then you will have to use 1116 to get credit for whatever Cdn tax you end up paying.
I trust you have been filing all the required RRSP paperwork ofver the last 20 years?
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing 
Yes, we've been filing TDF 90 ever since we moved here (1979), and 8891 for at least 15 years, + or -.
The nice lady at the RBC RRSP office put me on hold to check with someone "in the know" and came back with the 15% on RRSP lump sum withdrawals - I'm also querying our Cdn. local branch contact on that as well. I'll check further into your comment on 15% only on RRIFs.
As to growth of the RRSP in the U.S., that's just taxation on the withdrawals like with an IRA, right? Canada takes their cut, I file an IRS 1116 to get credit for that, then report the RRSP withdrawal elsewhere in the U.S. return. (Did that with Canadian dividends years ago.)
I'll go play with the two Canadian forms and there are lots of RRIF calculators out there, so I'm finding. I need to run the numbers on converting and how much above the minimum I need to take without triggering the 25% rate.
Interesting in the CRA publication about Deemed Residents. The "[b]and[/b]" is very important. We own a summer home and have Canadian bank accounts but our tax home is in the U.S. and we spend only 120 days a year up there. Whew!
Lastly, on the 5013-R tax form, it states that if we're Deemed Residents we have to report worldwide income. So if we're not, we don't have to report worldwide income? Otherwise, it looks like we just report OAS, CPP and RRSP withdrawals. Were we supposed to filing this form once we started OAS & CPP? Oops.
The nice lady at the RBC RRSP office put me on hold to check with someone "in the know" and came back with the 15% on RRSP lump sum withdrawals - I'm also querying our Cdn. local branch contact on that as well. I'll check further into your comment on 15% only on RRIFs.
As to growth of the RRSP in the U.S., that's just taxation on the withdrawals like with an IRA, right? Canada takes their cut, I file an IRS 1116 to get credit for that, then report the RRSP withdrawal elsewhere in the U.S. return. (Did that with Canadian dividends years ago.)
I'll go play with the two Canadian forms and there are lots of RRIF calculators out there, so I'm finding. I need to run the numbers on converting and how much above the minimum I need to take without triggering the 25% rate.
Interesting in the CRA publication about Deemed Residents. The "[b]and[/b]" is very important. We own a summer home and have Canadian bank accounts but our tax home is in the U.S. and we spend only 120 days a year up there. Whew!
Lastly, on the 5013-R tax form, it states that if we're Deemed Residents we have to report worldwide income. So if we're not, we don't have to report worldwide income? Otherwise, it looks like we just report OAS, CPP and RRSP withdrawals. Were we supposed to filing this form once we started OAS & CPP? Oops.
You're correct, RBC is incorrect: [url] http://www.cra-arc.gc.ca/ebci/nrtc/star ... do?lang=EN [/url] which leads to [url] http://www.cra-arc.gc.ca/ebci/nrtc/welcomeSubmit.do [/url]
25% for lump sum, 15% for periodic. Time to play with NR5 and 5013-R
My research continues...
25% for lump sum, 15% for periodic. Time to play with NR5 and 5013-R
My research continues...
Your missing the point of your 217 NR return filing. It isn;t to pay tax on any of the other income you make, it is strictly for determining the tax o your RRIF. You will need to report ALL WORLD income in the -- wait for it -- statement of world income schdule that you would attach.
Schedule A B and C will have to be filed for 217.
OAS and CPP are not taxable in canada in any event by treaty, but the need to be included on 217 because you are electing to have your pension income taxed "like" you were living in canada.
Note that an RRIF withdrawl in the 1st calendar year will be taxed 25%. Only thereafter are the withrdawals 15%.
Really the only thing you need to be reading is the 217 election infomation -- that will make it clear.
Schedule A B and C will have to be filed for 217.
OAS and CPP are not taxable in canada in any event by treaty, but the need to be included on 217 because you are electing to have your pension income taxed "like" you were living in canada.
Note that an RRIF withdrawl in the 1st calendar year will be taxed 25%. Only thereafter are the withrdawals 15%.
Really the only thing you need to be reading is the 217 election infomation -- that will make it clear.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing