Cardinal Point Wealth Management Warns Non-Residents of Canada of Potential 25% Tax Liability for Registered Retirement Savings Plan Withdrawals

Cardinal Point Wealth Management, a leading cross-border wealth management firm, is warning Canadians who live outside the country about the income tax implications of Registered Retirement Savings Plan (RRSP) withdrawals. To avoid potential financial burdens and the risk of noncompliance with tax regulations, a thorough understanding of these implications is crucial.

The issue is particularly important now, at a time when increasing numbers of Canadians relocate to the U.S. and other countries for work, retirement, or other reasons. When these non-resident Canadian taxpayers withdraw funds from their RRSP, the Canadian government imposes a withholding tax that can be as high as 25%. The tax is deducted at its source and can drastically reduce the amount of retirement savings the RRSP account holder receives.

However, Canada has signed tax treaties with several countries that include provisions to avoid double taxation. These treaties may allow taxpayers eligibility for a reduced withholding tax rate, or an outright exemption from the tax. That underscores the value of becoming familiar with both the RRSP withdrawal rules and how any applicable tax treaty may apply.

One of the first steps is to determine one’s status regarding residency. Even those who maintain close ties to Canada may still be deemed a non-resident. That is determined by factors that include physical presence, residential ties, and economic connections. Those criteria need to be carefully assessed in order to accurately determine potential tax liabilities. Non-residents must also take into account the tax regulations in their country of residence − since withdrawal from an RRSP may also be subject to taxation or reporting requirements in that jurisdiction. 

The timing of RRSP withdrawals is also critical. Strategically planning the withdrawals can help minimize tax implications and maximize the after-tax proceeds. As Kris Rossignoli, Cross-Border Tax and Financial Planner at Cardinal Point Wealth Management, explains, “We strongly urge non-residents of Canada with RRSP accounts to be proactive in understanding the income tax implications associated with withdrawals. Failing to consider these implications can lead to unexpected tax burdens and financial complications.”

Working with a knowledgeable cross-border tax planning advisor can help individuals navigate the complex, ever-changing tax landscape. Then they can make more informed decisions and implement strategies to minimize taxes and maximize the preservation and growth of wealth.

About Cardinal Point Wealth Management:

Cardinal Point Wealth Management is a cross-border wealth management firm that specializes in providing comprehensive cross-border financial planning and cross-border investment management services to individuals and families with ties to Canada and the United States. With offices in Canada and the United States, Cardinal Point Wealth Management offers personalized solutions to help clients achieve their financial goals while navigating the complexities of cross-border living, working, and investing.