When qualifying lump-sum payments are split into multiple payments (installments), and each payment is made to fulfill 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, then the lower rate of withholding is applied to each payment unless a trend of withdrawals is noticed.
For example, if at the beginning of the year you submit a request to deregister $1,500 per month out of your RRSP for a total amount of $18,000 annually, the withholding rate of 30% to each installment payment would be applied, because in this example the total amount of the withdrawal for the year is known in advance. Another example is multiple individual withdrawals submitted that would put the total annualized amount withdrawn for the year into a higher withholding tax rate, the higher tax rate will be used.
The withholding tax rate depends on your residency and the amount you withdraw. For non-residents of Canada, withholding is 25% unless reduced by a treaty.
Withholding Tax Rates
|
Gross Withdrawal |
All Provinces & Territories |
Québec |
Non-Resident |
|
$5,000 or less |
10% |
21% (5% + 16%) |
25% |
|
$5,000.01 to $15,000 |
20% |
26% (10% + 16%) |
25% |
|
$15,000.01 or more |
30% |
31% (15% + 16%) |
25% |
Note
The tax that was withheld may not always be enough to account for the tax you owe at your tax bracket when filing your tax return. You may have to pay more tax on the withdrawals when you include the withdrawal on your income tax and benefit return for that year.