Question 1

Can I transfer a US 401(k) or IRA into a Canadian RRSP without tax penalties?

Accepted Answer

Under Paragraph 60(j)(i) of the Canadian Income Tax Act and Article XXV of the US-Canada Tax Treaty, you can transfer 401(k) or Traditional IRA lump-sum distributions into an RRSP. You claim a foreign tax credit in Canada for the 30% US withholding tax paid to avoid double taxation.

Question 2

What US withholding tax applies when withdrawing a 401(k) after moving to Canada?

Accepted Answer

If you are a non-resident of the US, the IRS requires 30% mandatory non-resident withholding tax on lump-sum 401(k) or IRA distributions, unless modified by treaty provisions or Form W-8BEN filing.

Question 3

Does transferring a 401(k) to an RRSP require Canadian RRSP contribution room?

Accepted Answer

No. Under Paragraph 60(j)(i) transfers, lump-sum transfers from foreign pension plans do NOT consume your existing Canadian RRSP deduction limit.

Statutory Rule	Legal Subject	Operational Mechanism
CRA ITA § 60(j)(i)	Lump-Sum Foreign Pension Transfer	Allows full RRSP deduction for gross transfer amount without using annual contribution room.
DTAA Article XXV	US-Canada Tax Treaty Pensions	Prevents double taxation by allowing foreign tax credits (FTC) in Canada for US tax withheld.
IRC § 1441 / Form W-8BEN	US Non-Resident Withholding	Mandates 30% IRS withholding tax on US-sourced pension lump-sum distributions.

US 401(k) / IRA to RRSP Transfer Guide

Cross-Border Transfer Tax Estimator

Tax Statutory Codes

Cross-Border Tax Tools