How do I get the 15% treaty rate, not 30%, withheld on my US IRA or 401(k) as a Canadian resident?

It depends on how you take the money, and on whether you’re a US citizen or green-card holder. For a Canadian resident who is neither, the treaty’s 15% cap reaches only a periodic pension payment, so a lump-sum cash-out of an IRA or 401(k) stays at the 30% US default and no W-8BEN can lower it. A stream structured as a periodic pension payment can reach 15%, claimed on a W-8BEN filed with the custodian first. If 30% came off periodic money anyway, you recover the excess on a US nonresident return. A US citizen or green-card holder in Canada files a W-9 instead, and for a citizen the cap is closed.

Why is my IRA or 401(k) taxed at 30% by default?

Because 30% is the US default on income paid to a nonresident alien, which IRC 7701(b)(1) defines as someone neither a US citizen nor a US resident, so not a green-card holder. IRC 871(a)(1) sets that rate on US-source fixed or determinable income and IRC 1441(a) makes your custodian withhold it at source. This covers pre-tax IRA and 401(k) money; Roth and after-tax basis differ.

Publication 515 prints the same 30%, though graduated rates can reach the part arising from US services after 1986. Neither section reaches a US citizen or green-card holder, and a citizen has no 15% cap.

Does this change for US citizens in Canada?

Yes, and it changes the answer rather than the details. This page runs on nonresident-alien rules, and under IRC 7701(b)(1) neither a US citizen nor a green-card holder is one. So IRC 871(a)(1) and IRC 1441(a) don’t reach you, the W-8BEN is closed, and your form is a W-9. For a citizen the 15% cap is closed as well, because the treaty’s saving clause leaves Article XVIII(2) out of the paragraphs it protects. Withholding doesn’t vanish: IRC 3405 reaches your plan distributions, and 3405(e)(13) blocks the election out of it for a payment delivered outside the United States.

“You are a U.S. citizen (even if you reside outside the United States) or other U.S. person (including a resident alien individual). Instead, use Form W-9 to document your status as a U.S. person.” (Instructions for Form W-8BEN, Rev. October 2021, under “Do not use Form W-8BEN if you are described below”)

The resident-alien half of that sentence is the one people miss: you’re a US person under IRC 7701(a)(30)(A), and so is a green-card holder. IRC 7701(b)(6) keeps the card in force until it’s revoked, or administratively or judicially determined to have been abandoned, and lets it stop only where you’re treated as a resident of Canada under the treaty, don’t waive the treaty benefits, and notify the IRS. Until the card is gone for tax purposes the W-8BEN route stays shut, and whether the 15% cap could still be argued for a green-card holder runs through Article IV residence rather than the citizen saving clause. This page doesn’t settle that.

The cap closes for a citizen because of the saving clause. Article XXIX(2)(a), as replaced by the Fifth Protocol, says that except to the extent paragraph 3 provides, the Convention shall not affect a Contracting State’s taxation of its residents and, in the case of the United States, its citizens. Paragraph 3(a) then enumerates the obligations that survive that reservation, and on the pension side the operative list names paragraphs 1, 3, 4, 5, 6(b), 7, 8, 10 and 13 of Article XVIII. Paragraph 2, the one carrying the 15% cap, is not on it. That is a narrowing over time: the 1980 text carved out the whole of Article XVIII, and successive protocols replaced the carve-out with an enumeration.

Notice what this does not disturb. XVIII(1) and XVIII(7) are both on the surviving list, so the Roth treatment is unaffected for a citizen, and the 15% cap still binds Canada as source state on a payment out of a Canadian plan. What your US tax on the distribution actually comes to, and how the Canadian credit fits when the US tax is citizenship-based, is a different analysis than this page runs.

When does the treaty cut the rate to 15%?

Only on a periodic pension payment, and only if you aren’t a US citizen or green-card holder, because the W-8BEN is barred to both. Article XVIII(2)(a) of the Canada-US treaty caps US tax at 15% of the gross amount when a Canadian resident beneficially owns a periodic pension payment. IRA and 401(k) distributions fit the treaty term pensions (any payment under a superannuation, pension, or other retirement arrangement per Article XVIII(3)(a)), so they can reach 15%. But the cap is written for periodic payments only, and that one word decides everything.

Point of comparison	Periodic pension payment	Lump-sum cash-out	Distribution before age 59½
US tax at source	15% cap under treaty XVIII(2)(a), if claimed	30% under IRC 871(a)(1) and 1441(a)	Depends on periodic versus lump sum, exactly as in the two columns at left. Separately, a possible 10% IRC 72(t) tax on your return, unless a 72(t)(2) exception applies
Does the treaty 15% cap apply	Yes, if it’s a genuine periodic payment	No; a non-periodic payment isn’t capped	Same as at left; age isn’t a treaty condition. What’s unsettled is how the cap meets the 72(t) tax
How you get the rate	If you aren’t a US citizen or green-card holder, file Form W-8BEN with the custodian first, and confirm the custodian applies it	You can’t; the cap doesn’t reach a non-periodic payment, so 30% stands	Same W-8BEN route on the periodic question; the 72(t) side is a separate return item
Canadian side	Included under ITA 56(1)(a)(i); credit under ITA 126, subject to the credit limit	Same inclusion and credit, same limit	Same inclusion; the extra US tax complicates the credit
If you’re a US citizen or green-card holder	You give the custodian a W-9, not a W-8BEN; for a citizen there’s no 15% cap either, because XVIII(2) isn’t in the treaty’s saving-clause carve-out	Same form; the 30% nonresident rules don’t reach you, but IRC 3405 withholding does	Same; for a citizen the cap is closed regardless of age

A one-time full cash-out is the paradigm non-periodic payment. The US Treasury technical explanation is blunt that the treaty limit applies “in the case of a periodic payment” and that “other pension payments may be taxed in the State of source without limit.” So a lump sum defaults to 30%, the treaty doesn’t rescue it, and a W-8BEN can’t convert it. The mirror question runs the other way, from a Canadian plan to a US resident: drawing down an RRSP after you move to the US has its own withholding rules, and that guide takes them up.

Where’s the line between periodic and lump sum? It’s softer than you’d like. The treaty doesn’t define “periodic,” and under Article III(2) an undefined term takes its meaning from the law of the State applying the Convention, which for US withholding on a US payment is the US, where there’s no crisp US statutory test to point at. A genuinely annuitized or scheduled recurring draw reads as periodic; a full commutation doesn’t. Anything in between is fact-dependent and worth characterizing carefully before you touch the account. If what you’re weighing is moving the account rather than drawing on it, whether a 401(k) can follow you into an RRSP once you’re back in Canada is the separate decision.

How do I actually claim the 15% rate from my custodian?

If you’re not a US citizen or green-card holder, you hand the custodian a Form W-8BEN before the payment goes out. That’s the form a foreign beneficial owner uses; a US person files a W-9 instead. On a periodic payment, it’s how you ask for 15% instead of 30%.

The form can’t change the payment’s character. File one on a full cash-out and 30% still applies, because the treaty cap never reached it. Confirm the payer will apply the rate before you rely on it. The custodian reports the distribution and tax withheld on Form 1042-S, not a 1099-R.

What if my custodian withholds 30% anyway?

If you aren’t a US citizen or green-card holder, you recover the excess on a US nonresident return. IRS Publication 519 lists a refund of overwithheld tax as a reason a nonresident alien files Form 1040-NR. So if the payment was genuinely periodic and 30% came off anyway, you claim the difference back.

The Form 1042-S documents the income and tax withheld. The recovery only works where the cap applied. No 1040-NR turns a lump sum into 15%, because the cap never reached it. A return can still be due under 59½: the 10% 72(t) tax is a return item even where the 30% withholding was right.

Does the 10% early-withdrawal penalty apply?

Maybe. Before age 59½, IRC 72(t) adds 10% on the includible amount, on top of the ordinary tax, unless an exception in 72(t)(2) applies. One exception covers substantially equal periodic payments over your life expectancy, close to the structure the treaty rate wants. It carries strict conditions, so check before you count on it.

Whether the treaty’s 15% cap absorbs the 10% or stacks on top is unsettled; the primary sources don’t answer it. We route it to the assessment rather than quote a number the sources don’t settle.

How is the same distribution taxed on the Canadian side?

Canada taxes it too, because you live there. The distribution is included in your income as a superannuation or pension benefit under ITA section 56(1)(a)(i), and the US withholding is credited against your Canadian tax by the foreign tax credit under ITA section 126, subject to that credit’s limit. That limit is why the 1040-NR recovery matters: getting US over-withholding back from the IRS beats leaning on the Canadian credit to cover it.

• If you’re weighing the move, what happens to your registered accounts when you cross the border is the wider question.
• The mirror case, Canadian pensions going to a US resident, runs on the same treaty article: how CPP and OAS are taxed if you live in the US.

What should I do next?

Settle the payment’s character before anything moves. Lump sum or periodic stream: that choice sets your rate. If it’s periodic and you aren’t a US citizen or green-card holder, file the W-8BEN before the first payment. If 30% has already come off periodic money, the 1040-NR is your recovery path.

Map your US withholding, your Canadian bracket, and the credit fit before you commit, and settle the pre-59½ question if it applies. Planning before the money moves is cheaper than unwinding after.

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.