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RRSP’s, Investments and Leaving Canada

Question: I have some questions about RRSPs and leaving Canada. From your article – RRSP’s & Moving To The U.S. [1] You mention that it might make sense to leave your investments inside your retirement account when you leave Canada and avoid the withholding tax and the U.S. tax on the withdrawal.

My case, I have invested in stocks in my RRSP account. If I moved to Europe or the Middle East, I want to keep my RRSP as long as I can but not more than 20 years. Can you please advise me on the following questions?

Who Can Contribute to an RRSP?

Anyone who has earned income [2] while resident in Canada, or who has employment income from working in Canada can contribute to an RRSP.

Ceasing To Be A Resident & Your RRSP

If you leave Canada but leave your RRSP in Canada, your stocks and other investments will continue to grow tax free until you turn age 71. At age 71, your RRSP must be converted into a registered retirement income fund (RRIF), and annual withdrawals must be taken fro the account.

When you stop being a Canadian resdient, any withdrawals from your RRSP or RRIF are subject to Canadian non-resident withholding tax at 25%. The withholding tax may be reduced if a treaty exists between your new country and Canada. My previous article [1] indicated that the withholding tax was 15%. This rate is the rate between Canada and the U.S.

The withholding tax rates on withdrawals from retirement accounts is the subject of tax treaties. These rates apply to regular pension withdrawals when you are over age 65 and drawing retirement income. Otherwise the withholding is 25%. In either case, you do not need to file a Canadian tax return as long as you are not a resident of Canada.

Other Considerations

If you hold stocks, bonds or mutual funds in your RRSP and you are no longer a resident of Canada, you can withdraw from your RRSP, but may not be able to buy stocks or other investments through your stock broker due to Canadian securities laws. I would suggest discussing your concerns with the broker that holds your RRSP. They should be able to explain any issues with your planned move.