# RRSP withholding tax



## trentfrog (Jul 14, 2014)

HI Everyone

I think I have been given some very rotten advice by my RRSP rep. I am going to declare myself nontax resident in Canada because I am now living in Spain and he told me to cash in my RRSP and pay the taxes.

What do people usually do? Keep it and turn it to a RRIf later and get payments when you retire or cash out before you declare yourself non resident? I know I would have to pay 25% withholding tax if I cashed it out. What happens if I keep it? Do they deduct a withholding tax on the dividend/interest. Currently my dividends/interest are reinvested in the RRSP.


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## Nononymous (Jul 12, 2011)

trentfrog said:


> HI Everyone
> 
> I think I have been given some very rotten advice by my RRSP rep. I am going to declare myself nontax resident in Canada because I am now living in Spain and he told me to cash in my RRSP and pay the taxes.
> 
> What do people usually do? Keep it and turn it to a RRIf later and get payments when you retire or cash out before you declare yourself non resident? I know I would have to pay 25% withholding tax if I cashed it out. What happens if I keep it? Do they deduct a withholding tax on the dividend/interest. Currently my dividends/interest are reinvested in the RRSP.


We left ours untouched when we became non-resident. We figured we'd deal with it later, plus there was a good chance we'd return to Canada. I don't think anything was ever deducted from them during the years we were away. 

I would get some additional advice here. I certainly don't think there's a rush to do it before you declare yourself non-resident.


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## Rosepetal (May 20, 2013)

trentfrog said:


> HI Everyone
> 
> I think I have been given some very rotten advice by my RRSP rep. I am going to declare myself nontax resident in Canada because I am now living in Spain and he told me to cash in my RRSP and pay the taxes.
> 
> What do people usually do? Keep it and turn it to a RRIf later and get payments when you retire or cash out before you declare yourself non resident? I know I would have to pay 25% withholding tax if I cashed it out. What happens if I keep it? Do they deduct a withholding tax on the dividend/interest. Currently my dividends/interest are reinvested in the RRSP.


You can leave the RRSP as it is and your reinvested dividends and interest will continue to accumulate tax free in Canada.

However:
1. You will need to investigate the tax treaty with Spain to find out whether Spain is going to tax the dividends/interest accumulating in the year earned... in other words, does Spain recognize RRSPs?
2. If you are still a non-resident of Canada when you retire and start withdrawing that money, there is a default withholding of 25% tax anyway (unless the tax treaty with Spain says otherwise). So pay 25% now or 25% later on the whole accumulated amount.


I think whether it's a good idea to cash out the RRSP depends on the tax treatment in Spain, really. But I'm not an expert!


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