Withholding Tax on withdrawals from RRSP and SRRSP accounts

When funds are withdrawn from a Registered Retirement Savings Plan (RRSP) or a Spousal Registered Retirement Savings Plan (SRRSP), financial institutions will automatically deduct withholding tax (WHT).

As a core retirement savings vehicle in Canada, the RRSP offers tax-deferred benefits—any growth generated within the account is not subject to tax in the current year. When an account holder makes a withdrawal, the withdrawn amount is included in their taxable income for the year. For this reason, financial institutions deduct withholding tax upfront as a prepayment of the income tax liability on that portion of income.

The rate of withholding tax is determined by the withdrawal amount and the account holder’s province of residence. Quebec operates under an independent tax system, resulting in withholding tax rates that differ significantly from those in other Canadian provinces. The applicable rates are outlined below:

Note:

1. The withholding tax deducted by financial institutions is only prepayment and does not represent the final tax liability. Taxpayers must reconcile their tax obligations annually by filing a tax return, taking into account their total annual income, eligible deductions, tax credits, and other taxable events. If the deducted amount exceeds the actual tax owed, a tax refund may be claimed; if the amount is insufficient, the taxpayer will be required to pay the difference.

2. These rules apply to Canadian tax residents. Separate withholding tax rules apply to non-residents. The withholding tax rules for SRRSP accounts are identical to those for RRSP accounts.

3. If you withdraw from RRSP account, you can expect T4 RRSP Document next year.

For more detailed information on withholding taxes, please click here to visit the official website of the Canadian government or consult a qualified tax advisor for relevant advice.