What are the income tax implications of the VPB?
In a VPB: • return on investment is tax-sheltered; • payments are taxed as income in the year of withdrawal; • PEPP must withhold income tax from each payment and submit it to Canada Revenue Agency (CRA) on your behalf. PEPP uses the payroll tax method. The payroll tax method calculates how much tax to withhold from each payment based on the total estimated VPB payments for the calendar year after taking into consideration your personal tax credits claimed on your Canada Revenue Agency form TD1 form.
