Payments From an RESP
You have to withhold 15% or 20% income tax on a payment made under a registered education savings plan (RESP), other than an educational assistance payment or a refund of contributions. You must also withhold a special tax of 8%.
You are not required to withhold income tax on the first $50,000 if the following conditions are met:
- the payment from an RESP is an accumulated income payment that is made to one of the following persons:
- a subscriber of an RESP,
- an individual or public authority who, before the accumulated income payment, acquired from a public authority rights as sole subscriber of the plan, under a written agreement,
- an individual who, before the accumulated income payment, acquired the subscriber's rights under the plan, pursuant to a decree, order or judgment of a competent tribunal, or under a written agreement relating to a partition of property between the individual and a subscriber of the plan in settlement of rights arising out of, or on the breakdown of their marriage, or de facto or civil union,
- in the absence of such persons, a person who was the spouse of one of the above persons;
- the first $50,000 was transferred to the registered retirement savings plan (RRSP) of an annuitant who is either the beneficiary of the accumulated income payment or the beneficiary's spouse; and
- you have reasonable grounds to believe that the beneficiary of the accumulated income payment can deduct the amount transferred to the RRSP from his or her income for the year.
|Total income tax to withhold||=||$5,600|
|Income tax on the single payment||($70,000 − $50,000) × 20%||$4,000|
|Special income tax||$20,000 × 8%||+||$1,600|
Transfer of payments
You are not required to withhold income tax on a payment from an RESP if the amount is transferred directly to another plan, such as an RRSP, a registered retirement income fund (RRIF), a deferred profit-sharing plan (DPSP) or a registered pension plan (RPP). If only a portion of the payment is transferred directly to another plan, you must withhold income tax from the portion that is not transferred directly.