Leaving Canada in 2026? Withdrawing Your RRSP Could Cost You More Than You Think
How the timing of your RRSP withdrawal—before or after leaving Canada—can dramatically change your tax bill on your 2026 tax return.
Leaving Canada in 2026 is not just a relocation decision—it is also a tax event, especially if you plan to withdraw money from your Registered Retirement Savings Plan (RRSP). Many individuals assume that RRSP withdrawals are taxed the same way regardless of when they are taken. In reality, the exact timing of your RRSP withdrawal in relation to your departure date can result in very different tax outcomes, ranging from normal progressive income tax to flat non-resident withholding tax that may be final. Understanding how Canadian tax residency, departure rules, and withholding taxes work before you withdraw your RRSP can help you avoid unnecessary tax costs and ensure your 2026 tax return is filed correctly next year in 2027.
1. The Two Key Questions CRA Looks At
CRA’s tax treatment depends entirely on:
Your tax residency status at the time of the RRSP withdrawal
Your official departure date from Canada
👉 It does not matter when you earned the RRSP money.
👉 It does matter when you withdrew it and whether you were still a Canadian tax resident at that moment.
2. Scenario 1: RRSP Withdrawn Before You Leave Canada (Still a Resident)
What happens?
If you withdraw your RRSP before your official departure date in 2026, then:
You are still a Canadian tax resident
The RRSP withdrawal is treated as regular taxable income
It is included in your 2026 departure tax return
How it is taxed
RRSP withdrawal is added to your income
Tax is calculated using normal progressive tax rates
The bank will withhold 10%–30% at source, depending on amount:
Up to $5,000 → 10%
$5,001–$15,000 → 20%
Over $15,000 → 30%
This withholding is not final tax
👉 On your 2026 tax return (to be filed in 2027):
You may owe more tax, or
You may get a refund, depending on your total income and tax brackets
Important
No non-resident withholding applies
No tax treaty rates apply
You can use basic personal amount, tuition credits, capital losses, etc.
✔️ This option often results in lower overall tax if your income is low in the departure year.
3. Scenario 2: RRSP Withdrawn After You Leave Canada (Non-Resident)
This is the most common and most misunderstood situation.
What happens?
If you withdraw your RRSP after your departure date, then:
You are a non-resident of Canada
The withdrawal is not reported on a regular T1 return
It is subject to non-resident withholding tax (Part XIII tax)
Withholding tax rates
Default rate: 25%
Can be reduced to 15% or even 10% if your country has a tax treaty with Canada
The bank withholds the tax at source, and that tax is usually final.
Example
RRSP withdrawal: $100,000
Non-resident withholding tax (25%): $25,000
Amount received: $75,000
👉 CRA considers the $25,000 as full and final Canadian tax, unless you choose otherwise (see Section 5).
4. How This Appears on the 2026 Tax Return
If withdrawn AFTER departure
RRSP withdrawal does NOT go on your 2026 T1 return
It is not added to your taxable income
It does not affect departure tax
It does not qualify for personal tax credits
Instead:
You receive an NR4 slip showing:
Gross RRSP withdrawal
Tax withheld
5. Can You File a Return to Recover Some of the Withholding? (Section 217 Election)
Yes — in some cases.
If your RRSP was withdrawn as a non-resident, you may choose to file a Section 217 return.
What is Section 217?
It allows non-residents to:
Report RRSP withdrawals
Be taxed using regular Canadian tax brackets
Potentially reduce overall tax
When does Section 217 help?
Section 217 can be beneficial if:
You had little or no income worldwide
You qualify for personal credits
The withholding tax was higher than your actual tax liability
Important
Filing Section 217 is optional
If you file it, CRA recalculates tax
If regular tax is lower than withholding, you get a refund
If regular tax is higher, you must pay the difference
6. Does RRSP Withdrawal Trigger Departure Tax?
❌ No
RRSPs are excluded from deemed disposition rules.
No departure tax applies to RRSPs
No capital gains calculation
Timing only affects withholding vs regular taxation
7. Impact in Your New Country of Residence
This is critical and often overlooked.
Even if Canada treats the RRSP tax as final:
Your new country may still tax the full withdrawal
Some countries give foreign tax credits
Others tax RRSPs as regular income with no credit
⚠️ This can lead to double taxation if not planned properly.
8. Summary Table: RRSP Withdrawal Timing & Taxation
9. Strategic Planning Tips (Very Important)
If income will be low in departure year, consider withdrawing RRSP before leaving
Check tax treaty of destination country
Avoid withdrawing RRSP blindly after departure
Model both scenarios before making a decision
Large RRSP balances often require pre-departure tax planning
10. Final Takeaway
If you leave Canada in 2026 and withdraw your RRSP in 2026, taxation depends entirely on whether the withdrawal happened before or after your departure date.
Before departure → taxed as regular income on your 2026 tax return
After departure → taxed via non-resident withholding (usually 25%)
Section 217 may allow a refund
RRSP withdrawals do not trigger departure tax
Foreign country taxation must be considered
This is one of the most expensive tax planning mistakes people make when leaving Canada.