1

I am confused by the "Withholding tax" on an RRSP withdrawl.

If I withdraw funds from my RRSP, am I subjected to a 10%-20% with-holding tax? Does this basically mean that my money will be reduced by that much no matter what, or is the withholding tax then added to my income tax paid and I can claim it as a deduction at the end of the year?

2

The withholding tax is considerred income tax that is submitted early.

Note that the above withholding tax amounts are only estimates, which you will show on your tax return as taxes already remitted.

Taxtips website

2

It's not a "withholding tax" it's a "withholding tax amount". That is, they are not taxing you but they are holding back some of your withdrawal and sending it to the government to cover any taxes you will need to pay on the withdrawal. Same as your employer withholds some of your salary and sends it to the government for you.

You won't claim it as a deduction, but it will go at the end along with tax withheld from your salary or anything else. So if you owe $10,000 of tax but various entities have already sent the government $11,000 on your behalf, you will get a $1,000 refund.

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