Non resident RRSP withdrawal: 25% withheld, often the final tax

What rate applies to each kind of RRSP or RRIF payment?

A non resident pays 25% tax on RRSP payments under paragraph 212(1)(l) and on RRIF payments under paragraph 212(1)(q), withheld by the Canadian resident who pays them laws-lois.justice.gc.ca. The CRA lists both among the most common Part XIII income, and says the usual 25% applies unless a treaty with the client's home country reduces it canada.ca.

The treaty column turns on one definition. Treaties cap Canadian tax on "periodic pension payments", and section 5 of the Income Tax Conventions Interpretation Act excludes from that term an RRSP payment before maturity or in commutation of the retirement income, plus RRIF payments above a yearly limit laws-lois.justice.gc.ca. The CRA's treaty rate circular repeats that RRSP and RRIF payments are pensions, but not all of them are periodic pension payments canada.ca.

For a US resident, Article XVIII(2)(a) of the Canada US convention caps tax on a periodic pension payment at 15% of the gross amount canada.ca. The income codes come from the CRA's NR4 guide canada.ca; the full list is on the NR4 codes page, and every Canada US rate is on the treaty withholding page.

When does a RRIF payment stop counting as periodic?

Under paragraph (c) of the ITCIA definition, a RRIF payment isn't periodic once the year's payments, counted at or before that payment, exceed the greater of twice the RRIF minimum for the year and 10% of the fair market value of the fund's property at the start of the year laws-lois.justice.gc.ca. The minimum itself is the January 1 value times a prescribed factor canada.ca, and the factor at 72 is 0.0540 laws-lois.justice.gc.ca.

Worked example. Your client lives in the US, is 72 on January 1, 2026, and the RRIF holds $400,000 that day. The minimum is $21,600 ($400,000 x 5.40%). Twice that is $43,200, which beats 10% of the fund ($40,000), so the periodic limit for 2026 is $43,200.

The third and fourth rows take the same $60,000 out. Read literally, paragraph (c) has no "to the extent" wording, so the single payment that pushes the year's total past the limit loses periodic status in full laws-lois.justice.gc.ca. On that reading, splitting the withdrawal at the limit saves $4,320 here. The CRA's NR4 guide asks payers to phone it about periodic and lump sum RRIF payments to non residents canada.ca, so confirm the carrier's treatment before your client asks for a large payment. The age factors are on the RRIF minimum withdrawal table.

How does a section 217 election refund the withholding?

Section 217 lets your client swap the Part XIII tax on "Canadian benefits", which include RRSP and RRIF payments under paragraphs 212(1)(l) and (q), for Part I tax computed on a return. No Part XIII tax is payable on those benefits if your client files a Part I return within six months after the year end and elects in it laws-lois.justice.gc.ca. For 2025 that return was due June 30, 2026, with any balance due April 30, 2026, and a late election can't be accepted: the amount withheld becomes the final tax canada.ca.

Worked example. Your client emigrated before 2026, takes a $15,000 RRSP lump sum in 2026 and has no other income anywhere. The carrier withholds $3,750. On a section 217 return, federal tax is 14% of $15,000, or $2,100 canada.ca. All of their world income is in the return, so they claim the full 2026 basic personal amount of $16,452 canada.ca, a credit of $2,303.28 at 14%. Tax drops to $0, the 48% surtax on income not earned in a province is 48% of nothing laws-lois.justice.gc.ca, and the full $3,750 comes back.

Foreign income changes the answer. Taxable income earned in Canada becomes the greater of the Canadian benefits and your client's world income less deductions, with a separate credit in subsection 217(6) for the tax tied to the income Canada can't reach laws-lois.justice.gc.ca. Credits shrink too: below 90% of world income in the return, they're capped. The CRA's own example adds $12,000 of US interest to an $18,000 pension, the share drops to 58%, and the credits are limited to $2,610, which is 14.5% of the pension canada.ca. The election helps only if tax on line 43500 is less than the Part XIII tax, so run both before filing. The rest of the return is on the non resident tax return page.

Can your client cut the withholding before the money comes out?

Yes, with Form NR5, the application by a non resident for a reduction in the non resident tax withheld canada.ca. The CRA's guide says to send it on or before October 1, or before the first payment is due. An approved NR5 is valid for five tax years, and your client then has to file a section 217 return for each year in that period canada.ca.

The payer can't act on an estimate. It may not apply a reduction until it has the CRA's written authorization, and it then reports the payment on the NR4 slip with exemption code J canada.ca.

Some treaties go further. Canada's treaties with Algeria, Azerbaijan, Brazil, Croatia, Cyprus, Ecuador, Greece, Ireland, Italy, the Philippines, Poland, Portugal, Romania, Senegal, Slovenia and Türkiye exempt certain pension and similar payments up to a limit, but again only after the CRA authorizes it in writing canada.ca. Check which payment types the specific treaty covers before you promise a client a 0% rate.

What does the Canadian payer have to do?

Withhold, remit and report. The carrier remits the Part XIII tax so the CRA receives it on or before the 15th of the month after the payment, and files the NR4 slips and return by the last day of March after the calendar year canada.ca. For 2026 payments that's March 31, 2027; see the NR4 deadline page.

Getting the rate wrong costs the payer, not just the client. A payer that fails to deduct stays liable for the tax, plus a 10% penalty on the amount it should have withheld, and 20% for a repeat failure made knowingly or through gross negligence canada.ca.

A transfer between plans isn't a withdrawal. The part of an RRSP or RRIF payment that the payer transfers, under an authorization in prescribed form, to another RRSP, an annuity or a RRIF of the same non resident annuitant is carved out of both paragraphs laws-lois.justice.gc.ca. The CRA's form for that is NRTA1, the authorization for non resident tax exemption canada.ca.

Which edge cases trip up former residents?

Leaving Canada doesn't collapse the plan. RRSPs and RRIFs are excluded from the deemed disposition on emigration and from the T1161 property list canada.ca, so the tax arrives when the money comes out. The departure year itself is on the departure tax page.

Timing decides the rate. A withdrawal while your client is still resident is ordinary RRSP income with the lump sum withholding rates applied, and the same withdrawal after the residency end date is a Part XIII payment at 25% or the treaty rate. Pin down the departure date before the carrier processes anything.

A regular return won't recover Part XIII tax. The CRA says Part XIII tax isn't refundable by filing a Canadian return, and that a non resident shouldn't report the income on one unless electing canada.ca. Only the section 217 route, or Form NR7-R when too much was withheld, gets money back canada.ca.

Treaty relief for RRSP lump sums is the exception, not the rule. The US convention caps periodic payments only canada.ca, and an RRSP payment before maturity isn't periodic under the ITCIA laws-lois.justice.gc.ca. For a US client who wants a lower rate, converting to a RRIF and staying under the periodic limit usually does more than any treaty claim; see converting an RRSP to a RRIF.