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withholding tax on RRSP - What age?
March 24, 2018
5:02 am
Kidd
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Do you have a company pension?
You may also be recieving investment income. GIC interest income?
PLUS cashing out your rrsp?

Total income is everything added together.

April 17, 2018
8:24 am
Bill
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Norman1, re our earlier discussion about withholding tax and tax withholding, it should be noted there are in fact some cases where withholding taxes are actually taxes, not just tax prepayments - e.g. a family member met two former federal civil servants who have established residence in Cayman Islands (thus they don't file Canadian income tax returns) and they have 25% withheld from their gov't pensions as withholding taxes. An average tax rate of 25% is higher than most Canadians end up paying. There is no tax treaty with Cayman, no relief for them.

April 17, 2018
4:13 pm
Save2Retire@55
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Kidd said
Do you have a company pension?
You may also be recieving investment income. GIC interest income?
PLUS cashing out your rrsp?

Total income is everything added together.  

Well, at this moment of the life, there is no company pension but that might change.
Yes, certainly (and hopefully) there will be investment / GIC income but the plan is to calculate everything to keep it reasonable to pay less tax.

April 17, 2018
4:35 pm
Save2Retire@55
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Bill said
Norman1, re our earlier discussion about withholding tax and tax withholding, it should be noted there are in fact some cases where withholding taxes are actually taxes, not just tax prepayments - e.g. a family member met two former federal civil servants who have established residence in Cayman Islands (thus they don't file Canadian income tax returns) and they have 25% withheld from their gov't pensions as withholding taxes. An average tax rate of 25% is higher than most Canadians end up paying. There is no tax treaty with Cayman, no relief for them.  

This really sucks! If I understood correctly, in case of withdrawing in a country which doesn't have a tax treaty with Canada, I'll have to pay the min 25% regardless of the income?

April 17, 2018
6:28 pm
Bill
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Save, note my post was just an example re. federal civil service pension income. I'd suggest you check with a tax lawyer if you're planning what you indicate. I'm certainly no expert, I just know that Canadian source income that goes to a non-resident of Canada residing in a non-tax treaty country can be subject to 25% withholding tax (withheld and remitted to Cdn gov't by the payor of the income) so you end up getting 75% net with no other opportunity for recourse.

See link below also for more info (note it indicates Cdn source interest income might be exempt from withholding tax).

https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/individuals-leaving-entering-canada-non-residents/non-residents-canada.html

Again, this site is not the place to get definitive answers to these types of questions.

April 17, 2018
7:05 pm
Norman1
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Bill said
Norman1, re our earlier discussion about withholding tax and tax withholding, it should be noted there are in fact some cases where withholding taxes are actually taxes, not just tax prepayments - e.g. a family member met two former federal civil servants who have established residence in Cayman Islands (thus they don't file Canadian income tax returns) and they have 25% withheld from their gov't pensions as withholding taxes. An average tax rate of 25% is higher than most Canadians end up paying. There is no tax treaty with Cayman, no relief for them.  

Tax withheld can sometimes match the tax owed. If I complete the US non-resident alien return (Form 1040NR), I will find that I owe the IRS a reduced 15% tax (thanks to the Canada-US tax treaty) on dividends from US companies. That matches the reduced 15% tax withholding on those dividends paid to Canadian recipients.

A tax treaty can change the Canadian taxes owing. But, non-residents can file a Canadian tax return regardless of a tax treaty. So, I don't think it is the lack of a tax treaty with the Cayman Islands that denies them relief. They likely would have been able to use the 25% taxes paid to Canada as a credit against their Cayman Islands income taxes.

I think the challenge is that the Cayman Islands has a personal income tax rate of 0%! sf-surprised So, there's no Cayman Islands personal income taxes to apply the 25% Canadian taxes paid against.

April 17, 2018
8:10 pm
Bill
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"I don't think it is the lack of a tax treaty with the Cayman Islands that denies them relief." Norman1, are you saying if there's no treaty a country where you file is going to give you credit for taxes you paid to another country?

Also I note the withholding taxes I pay to USA (on my USA-based investments) are a credit on my Canadian return, without limit, so they can even contribute to the refund cheque I end up getting, i.e. they are not just a credit against my taxes, they will actually be paid out to me if I'm entitled to a refund. So I don't see how a lower income tax rate in the country of filing would be an impediment to getting it all back, but maybe this is the case in my case because there's a treaty between USA and Canada.

I'm way over my head here, I'll defer to your expertise, just wondering.

April 18, 2018
3:33 pm
John Wayne (Marion)
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With holding tax stops when you take the mandatory age % from a RRIF. But at years end you may or likely will have to pay income tax on the withdrawal.

April 18, 2018
3:52 pm
Bill
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Mary, that's what Norman1 has called "tax withholding", i.e. just a prepayment of taxes, as RRIF withdrawals are subject to the regular income tax. It's not an additional tax as we are talking about with income that crosses borders.

April 18, 2018
5:52 pm
Norman1
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Bill said
"I don't think it is the lack of a tax treaty with the Cayman Islands that denies them relief." Norman1, are you saying if there's no treaty a country where you file is going to give you credit for taxes you paid to another country?

Canada does credit foreign taxes paid against Canadian income taxes on that foreign income, with or without a tax treaty. I'm not sure every country does.

Michael Atlas' article Canadian Foreign Tax Credits and Tax Treaties-MYTH VS. REALITY explains that the foreign tax credits come from the Income Tax Act and not any particular tax treaty.

Also I note the withholding taxes I pay to USA (on my USA-based investments) are a credit on my Canadian return, without limit, so they can even contribute to the refund cheque I end up getting, i.e. they are not just a credit against my taxes, they will actually be paid out to me if I'm entitled to a refund. So I don't see how a lower income tax rate in the country of filing would be an impediment to getting it all back, but maybe this is the case in my case because there's a treaty between USA and Canada. …

In Canada, the federal and provincial foreign tax credits are limited to the approximate amount of the Canadian income taxes on that foreign income. For example, there is a calculation of the Canadian federal taxes on the foreign income on form T2209.

There's no refund from the Canadian government for higher foreign taxes paid if they exceed the Canadian income taxes on that foreign income.

April 18, 2018
7:51 pm
Bill
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Wow, Canadians are very nice people to forgo the usual Canadian income taxes of foreign income of residents if another country has already scooped the taxes under their tax laws!

And I see what you mean, Norman1, it's line 2 of the T2209 that provides the cap that you indicate in your last two paragraphs.

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