19 May 1998 External T.I. 9805935 - WITHHOLDING TAX ON RRSP/RRIF WITHDRAWALS

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues: What is the withholding tax rate for a lump sum payment out of RRSP or RRIF for a U.S. resident?

Position: 25%

Reasons: Wording of the Convention

XXXXXXXXXX 				5-980593
					Fouad Daaboul
Attention:  XXXXXXXXXX 

May 19, 1998

Dear Sirs:

Re: U.S. Resident withholding tax on RRSP/RRIF withdrawals

We are writing in response to your letter of March 4, 1998, wherein you requested the withholding tax rates on withdrawal payments by the annuitant, a U.S. resident, from her or his registered retirement savings plan (the "RRSP") and her or his registered retirement income fund (the "RRIF") which are subject to Part XIII tax under paragraphs 212(1)(l) and (q) of the Income Tax Act (the "Act").

For the purposes of the Canada - U.S. Income Tax Convention (the "Convention"), all payments (periodic pension payment or lump sum payment) out of RRSPs and RRIFs are considered to be pensions.

As the U.S. resident has requested such withdrawals, we assume that the payments out of RRSP and RRIF are lump sum payments. In this case, paragraph 2(a) of Article XIII of the Convention does not provide any relief and consequently the withholding tax rate remains at 25% of any payment pursuant to subsection 212(1) of the Act.

On the other hand, where a particular RRSP/RRIF payment made to a resident of the United States is a "periodic pension payment", such a RRSP/RRIF payment would be subject to tax at the reduced rate of 15% pursuant to paragraph 2(a) of Article XIII of the Convention.

We trust our comments will be of assistance to you.

Yours truly,

Paul Lynch
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate