What is the 90% Rule in Canada for RRSP Withdrawals?

Learn about Canada's 90% rule for RRSP withdrawals that reduces withholding tax to 25% for qualifying non-residents. Key info for expatriates.

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The 90% rule in Canada refers to a tax guideline that allows non-residents of Canada to withdraw funds from their Canadian Registered Retirement Savings Plans (RRSPs) at a withholding tax rate of just 25%, instead of the regular rates that can go up to 50%. To qualify, at least 90% of the individual’s worldwide income for the year must be included in their Canadian tax return. This rule is designed to benefit expatriates or those who have worked in Canada but now reside in another country.

FAQs & Answers

  1. Who qualifies for the 90% rule in Canada? Non-residents who include at least 90% of their worldwide income on their Canadian tax return can qualify for the 90% rule, which lowers RRSP withholding tax to 25%.
  2. How does the 90% rule affect RRSP withdrawal taxes? Under the 90% rule, qualifying individuals pay a reduced withholding tax rate of 25% on RRSP withdrawals instead of regular rates that can be as high as 50%.
  3. What is the regular withholding tax rate on RRSP withdrawals for non-residents? Without applying the 90% rule, RRSP withdrawals by non-residents can be subject to withholding tax rates up to 50%.
  4. Can Canadian expatriates benefit from the 90% rule? Yes, Canadian expatriates who meet the income reporting criteria can benefit from the 90% rule to reduce tax withheld on RRSP withdrawals.

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