Author Topic: Retirement Abroad - RRSP Liquidation Strategy  (Read 1588 times)

cdn5cents

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Retirement Abroad - RRSP Liquidation Strategy
« on: December 10, 2019, 11:25:27 AM »
Hello Group,

I can obtain a Portuguese passport through my mother and have recently discovered that to encourage residency, the Portuguese government will exempt income tax for the first 10 years to new residents...!!!

I'm recently divorced, and as soon as my kids go to school it is our intention to dispose of the principal residence making it easy to break ties with Canada.  It is my understanding that as a non-Canadian resident, a lump sum withdrawal from my RRSP would then be subject to a 25% Canadian withholding tax, but, if I convert my RRSP to a RRIF that rate could be even lower (15-25%).  If this is the case, what are the rules and factors that influence the effective withholding tax rate (i.e. could I structure a payments within the 10 year tax exempt period and qualify for the lower withholding tax?) ?

Any thoughts from the group are appreciated.  Thank you in advance.

FTR... Canada and Portugal appear to have a tax treaty in place.


RichMoose

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Re: Retirement Abroad - RRSP Liquidation Strategy
« Reply #1 on: January 08, 2020, 06:29:52 PM »
With RRIFs, the 15% rate applies only to the minimum required withdrawal (based on the age calculation). Amounts exceeding that are taxed at 25%.

I don't think there is really any special advantage to Portugal's regime if you are basing your income from RRSP/RRIF withdrawals since these are rarely taxed twice. Almost every country with a Canadian tax treaty will not charge local taxes as long as the withholding tax applies on the Canadian side.

The real advantage is if you have a lot of foreign dividend income (you would only pay the withholding tax on the issuing country side), you start a business in Portugal, or if you are a specialist employed in Portugal.

daverobev

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Re: Retirement Abroad - RRSP Liquidation Strategy
« Reply #2 on: January 09, 2020, 07:20:31 AM »
You have to look at the Canada-Portugal double taxation agreement. As an example, RRIF payments to UK residents have zero tax withheld (but the UK doesn't recognise the RRIF/RRSP so any distributions or sales within are treated as taxable events.. though honestly I haven't entirely got to the bottom of how RRIFs are handled, because if it's treated as a pension they can't tax inside AND tax the withdrawal. It may be that the RRSP isn't recognised but the RRIF is. Anyway).

AFAIK here in France I will be taxed by Canada at 25% of any and all amounts withdrawn. I don't (yet) know how France will view the RRSP itself, but I expect it will also not see it as a tax shelter, so any dividends or sales will be taxable.

Remember if you get a Portuguese passport you actually have an EU passport, so you could go and live anywhere. If you're just doing this for change-of-location rather than a deep desire to live in Portugal, you may want to see if other countries are a better tax-fit.