What is the RRSP withholding tax?

Gena Katz, a chartered accountant and principal with Ernst and Young, has the answer.

Gena Katz 9 February, 2005 | 2:00PM
Dear Expert,

I don't really understand the RRSP withholding tax and I am having trouble finding information on it. What are the different rates of withholding tax? Is the applicable rate based on the total withdrawal amount for the year or per individual withdrawal?

Expert Answer:

RRSP withholding tax is an amount that your RRSP administrator is required to withhold from your gross RRSP withdrawal and remit to the government on account of your income tax. The withholding tax rate depends on the amount of the individual withdrawal. For amounts up to $5,000, the rate is 10% (21% in Quebec), from $5,001 to 15,000, the rate is 20% (26% in Quebec), and on amounts over $15,000, the rate is 30% (31% in Quebec).

The percentage used for a withdrawal depends on the amount of that particular withdrawal, not on cumulative withdrawals for the year. When you report the RRSP withdrawal in your return, you will be required to include the gross amount of the withdrawal in income and the withholding tax will be recorded as taxes paid. You end up paying tax on the withdrawal at your marginal personal rate.

Withholding is not required for withdrawals under the Home Buyer's plan or the Lifelong Learning plan.

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Gena Katz

Gena Katz