Transfers out of an RRSP

Because Registered retirement savings plans (RRSPs) are registered with the CRA and come with tax benefits & limitations, internal transfers of either cash or investments out of these types of accounts have special considerations. (Unless the transfer is going to another RRSP for the same individual.)

Any transfers of cash or investments out of an RRSP are treated the same way as a regular withdrawal to your bank account in the eyes of the CRA, and may incur additional taxes.

You are taxed a ‘withholding amount’ when transferring funds or investments out of your RRSP to help cover any income taxes owing as a result of the transfer. The withholding amount may or may not completely cover any potential future taxes, this depends on your total overall income and other factors like deductions and etc.

Please double check with a tax professional if you have doubts about the tax implications of a transfer out of an RRSP.

Review the chart below to determine how the gross amount of your transfer will be taxed.

Withholding taxes for Quebec residents include both the CRA and Revenu Quebec withholding amounts combined.

¹Represents the CRA withholding amount. ²Represents the Revenu Quebec withholding amount.

The tax withheld may not always be enough to account for the tax you owe for your tax bracket. You may be asked to pay more on the withdrawal when you include the withdrawal on your income tax and benefit return for that year.

For USD transfers: USD transfers are represented as the CAD equivalent to determine which ‘tier’ of withholding tax is applied.

For example: A transfer of $4,500 USD will actually be charged 20% withholding tax. This is because $4,500 USD x FX rate of 1.3 USD/CAD will be over $5,000 CAD and into the 20% tier.

You can request a transfer of either Canadian or U.S. dollars out of your RRSP account using the ‘REQUESTS’ -> ‘Transfer Funds’ page.

The withholding taxes will be applied to the gross amount of the transfer.

You can request to transfer your investments out of your RRSP by logging in, then heading to the Requests -> Transfer Investments page.

Withholding taxes are applied to the gross amount of the market value of the investments, and charged to your cash balance in the RRSP.

Because Questrade does not sell your investments during this type of request, you are required to have the cash balance available in your RRSP account to cover these withholding taxes.

When you transfer investments out of an RRSP, you have a few choices as to which market value is represented, depending on the type of investment. This will affect what price we are using, and how much withholding taxes will be applied.

To indicate which price you’d like Questrade to use for determining your transfer amount, you can leave a comment on the request after it has been placed.

Simply click the “Request history” tab, and click “Add comment” for the request indicating which price you’re using.

Note: The information in this blog is for educational purposes only and should not be used or construed as financial or investment advice by any individual. Information obtained from third parties is believed to be reliable, but no representations or warranty, expressed or implied, is made by Questrade, Inc., its affiliates or any other person to its accuracy.