Can I roll over my IRA assets to a sheltered Canadian plan?

By Denise Appleby AAA
A:

It does not appear that this is an option for you. The current version of the U.S. Code and the U.S./Canada Treaty do not allow for transfers or rollovers between <?xml:namespace prefix = st1 /?>U.S. and Canadian retirement plans. Furthermore, the Canadian retirement plan may not consider the assets eligible (to be transferred to the plan). Should you remove the assets from the IRA, the transaction would be considered a taxable distribution from the IRA unless the assets were rolled over to an eligible retirement plan as defined by the U.S. Tax Code.

Because you reside outside of the U.S., the rate at which you are taxed is determined by your U.S. citizenship or resident alien status. If you are a U.S. citizen or resident alien and the amount is not being sent to a home address in the U.S., the IRA custodian must withhold 10% for federal taxes; this withholding cannot be waived. If you are not a U.S. citizen or resident alien, the IRA custodian will also withhold 10% for federal taxes; however, in this instance, you can choose to waive the federal withholding and then become subject to the Canadian treaty rate. Certain documentation must be provided to the IRA custodian if the treaty rate is to be applied.


(For more information about IRA taxation, read Introductory Tour Through Retirement Plans, Moving Plan Assets: How to Avoid Mistakes and Combining Your Plan Assets? Not So Fast!)

This question was answered by Denise Appleby
(Contact Denise)

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