Phil Hogan is a Canadian and US CPA working with clients throughout Canada and the US. Phil advises on cross border tax and financial planning matters. Phil can be reached at phil@beaconhillwm.ca or via telephone at 778.433.1314. You can also read more about Phil at www.Beaconhillwm.ca/team/about-phil/
Tax withholdings on RRSP withdrawal to Italy
18 September 23 
Cross Border Tax Key Points
- RRSP withdrawals by Canadian residents moving to Italy are subject to a 25% withholding tax by Canada.
- The Canada-Italy tax treaty may reduce the withholding tax on RRSP withdrawals under certain conditions.
- Properly reporting RRSP withdrawals on both Canadian and Italian tax returns is essential to avoid double taxation.
- Planning RRSP withdrawals strategically can help minimize tax liabilities when relocating to Italy.
- Consulting with a cross-border tax advisor is crucial for managing the tax implications of RRSP withdrawals to Italy.
If you need help in reviewing your cross-border tax or investment situation, please feel free to reach out to us here. We look forward to speaking to yo
Question
Dear Phil,
I hope this email finds you well. I wanted to follow up on the message I left on chat and provide more context about my situation and inquiries.
As you may recall, I am a dual British/Canadian citizen and currently reside in Italy where I have residency through my British citizenship and enjoy the benefits of a European resident due to the Brexit withdrawal agreement. In 2019, I filed taxes in Canada as I was a resident, worked, and received payment there for several months. However, in 2020, I was a full-time resident in Italy but did not work. Since 2021, I have been freelancing and exclusively paying taxes in Italy.
I still hold a bank account in Canada with some funds and an RRSP, but I no longer have any other ties to Canada, such as property, family, or dependents. Therefore, I am considering closing my Canadian bank account and withdrawing my RRSP funds while I am still working full time as a non-tax resident.
I have a few questions regarding the process, and I was hoping you could help shed some light on them for me. Firstly, I would like to know if it is possible to withdraw RRSP funds as a non-resident. Additionally, if it is possible, what taxes would I be expected to pay in Canada, and how would that work? I have seen figures ranging between 15-25%, but I am not entirely sure what the correct percentage is. Lastly, I am curious to know how the RRSP funds would be treated in Italy.
As a freelancer, I am subject to a cap on yearly earnings depending on my tax bracket. Suppose the RRSP funds are counted as earnings for the tax year. In that case, I would need to plan ahead and withdraw them only when my earnings are under the limit.
I have tried to research these questions myself, but I have been unable to find a complete answer. I would be grateful for any information or leads that you may have to help me navigate this situation.
Thank you for taking the time to read this email and for your assistance.
Best regards, XXXXXXX
Answer
Hi XXXX
I’m certainly not an expert in Italian taxes, however from the reading of the treaty it looks like Canada would tax you at 15% on periodic payments and 30% on lump sum withdrawals. I would assume the withdrawal would be taxed in Italy and the Italian government would give you credit for the Canadian withholding taxes. Once again, this is my assumption.
If your Italian tax rate is relatively low it might make sense to start taking monthly withdrawals at 15% to exhaust the account. If you took a lump-sum at 30% you might not be able to recover all the Canadian tax withheld on your Italian tax return.
Hope that helps.
Phil
This commentary reflects the personal opinions, viewpoints and analyses of the Beacon Hill Wealth Management Ltd. partner providing such comments, and should not be regarded as a description of advisory services provided by Beacon Hill Wealth Management Ltd. or performance returns of any Beacon Hill Wealth Management Ltd. client. The views reflected in the commentary are subject to change at any time without notice. Nothing in this commentary constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Beacon Hill Wealth Management Ltd. manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results. Any discussion about taxation is for educational purposes only and should not be viewed as professional advice. Consult your tax professional for tax advice on your particular situation.
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