TaxTips.ca
Canadian Tax and
Financial Information
Tax on RRSP and RRIF Withdrawals

Ads keep this website free for you.
TaxTips.ca does not research or endorse any product or service appearing in ads on this site.  Before making a major financial decision you  should consult a qualified professional.

Looking for US tax information?
See
USTaxTips.net

Need an accounting, tax or financial advisor? Look in our Directory.      Stay Connected with TaxTips.ca!      Internet Explorer - Use compatibility view for calculators to work properly!

Home
What's New
Calculators
Personal Tax
Business
Sales Taxes
Free in 30!
Financial Planning
RRSP RRIF TFSA
Real Estate
Stocks Bonds etc.
Seniors
Disabilities
Canada
Alberta
British Columbia
Manitoba
Ontario
Quebec
Saskatchewan
Atlantic Provinces
Territories
Federal Budget
Provincial Budgets
Statistics etc.
Glossary
Site Map
Directory
Advertise With Us
Contact Us/About Us
Links & Resources



RRSPs RRIFs and TFSAs -> Withholding tax on RRIF and RRSP withdrawals

What Tax is Deducted From RRIF or RRSP Withdrawals?

Income Tax Regulations s. 103(4)

Note that the withholding tax amounts deducted from your withdrawals are only estimates of what you will owe in taxes.  The amounts withheld will show on your tax return as taxes already remitted.  The withdrawal amount will be included in your taxable income.  Your total taxable income will determine the total taxes payable.  This may result in more or less taxes being payable.

RRSP Withdrawals Withholding Tax

When a lump sum amount is withdrawn from an RRSP, the amount of tax that will be withheld is:

Withdrawal Amount % Federal Tax Withheld
From $0 to $5,000   10%  (5% in Quebec)
From $5,001 to $15,000    20% (10% in Quebec)
Greater than $15,000   30% (15% in Quebec)

Note that for non-residents of Canada, the withholding tax rate is 25%, but can be reduced by a tax treaty.

For a single withdrawal from RRSP funds held in the province of Quebec, there will also be 16% provincial income tax withheld.  See Revenue Quebec's Payments from an RRSP. a VRSP, a PRPP or a RRIF, and their information about single payments.

The above withholding tax rates also apply to in kind withdrawals, so sufficient cash must be available in the RRSP to pay the tax.

Multiple Lump-Sum Withdrawals From RRSP or RRIF

When an individual makes a single request for more than one withdrawal, in the form of instalments, it is Canada Revenue Agency's (CRA) position that the withholding tax rate should be based on the total of these withdrawals.  When a RRIF annuitant receives monthly instalment payments and makes a series of requests for additional withdrawals in a short period of time, it is the CRA position that the withholding tax rate should be based on the total of additional withdrawals.  They also indicate that payers should use their discretion in determining the rate.  For further information on this topic, see the CRA document Withholding tax on payments from a RRIF.  See also Question 14 from the 2003 RRSP/RRIF Consultation Session, Withholdings on Multiple Withdrawals.  From that question:

It is the CRA's longstanding position that, when qualifying lump-sum payments are split into multiple payments (installments), and that each payment is made in fulfillment of a single compensation that is known in advance, the withholding rate applicable to the total payment is used.

If each payment is a separate payment, the lower rate of withholding applies to each.

For example, if at the beginning of the year you receive a request to pay a client $1,500 per month out of the client's RRSP for an annual amount of $18,000, you would apply the withholding rate of 30% to each installment payment. Because the total amount of the withdrawal for the year was known in advance, the withholding rate applicable to the total amount withdrawn is to be applied.

If, later in the year, the client requests an additional withdrawal that is over and above the installment payments, you should use the rate that applies to that payment only.

There was also a 2008 consultation, and Q24 addressed the same topic, saying:

Question 24 Does the CRA have any plans to change the lump-sum withholding tax rates that apply to multiple withdrawals made over a short period of time, such as adding a threshold after which all withdrawals in the same year would be subject to the higher withholding rate?

Answer 24 No. We have no plans to change the calculation of how tax should be withheld in respect of multiple withdrawals from an RRSP or a RRIF over a short period of time. The information about tax withholding at the end of the answer to question 7, Withholding tax on payments from a registered retirement income fund (RRIF) continues to apply.

RRIF Withdrawals Withholding Tax

No tax is withheld when the minimum amount is withdrawn from a RRIF.  When withdrawals in excess of the minimum amount are made, the above RRSP lump sum withholding tax rates apply.  For further information on this topic, see the CRA document Withholding tax on payments from a RRIF.  For Quebec, the amount withheld from a single payment from a RRIF will be 16% of the amount exceeding the minimum amount.

The withdrawal from the RRIF is included in the taxpayer's taxable income, so depending on the individual's circumstances, tax may be payable when the tax return is filed.

The minimum withdrawal amount was waived in 2007 for RRIF owners who turned 70 or 71 in 2007, and in 2008 for RRIF owners who turned 71 in 2008.  However, withdrawals up to the normal minimum withdrawal amount were still not subject to withholding tax.

Fees on RRSP or RRIF Withdrawals

There may be fees charged by your brokerage or financial institution when a withdrawal is made from an RRSP or RRIF.  These fees are not tax deductible.  This applies if they are paid by the RRSP or RRIF or from a non-registered account.

Also on TaxTips.ca

bulletCRA warnings regarding schemes which promise tax-free RRSP or RRIF withdrawals.
bulletGet your money out of RRSPs tax-free (sort of) - to see how you can shelter your RRSP withdrawals to save tax

CRA Resources

bulletTax Rates on Withdrawals
bulletTax Treaties

Tax Tip:  Get INDEPENDENT advice from a tax professional before investing in tax-saving "schemes"  that promise to get your money out of your RRSP without paying tax.

Revised: February 08, 2017

 

 

Copyright © 2002 - 2017 Boat Harbour Investments Ltd. All Rights Reserved  See Reproduction of information from TaxTips.ca

Facebook  | Twitter  |  Google + |  Monthly Newsletter Sign-up  What’s New E-mail Notification RSS News Feed
The information on this site is not intended to be a substitute for professional advice.  Each person's situation differs, and a professional advisor can assist you in using the information on this web site to your best advantage. 
Please see our legal disclaimer regarding the use of information on our site, and our Privacy Policy regarding information that may be collected from visitors to our site.