RRSP and TFSA Contributions as a Non-Resident of Canada

Can non-residents contribute to an RRSP or TFSA?

Yes to both, with very different results. An RRSP contribution is allowed while you live abroad, but it is often worth little: pay earned abroad builds no new room, and the deduction only lowers Canadian income taxed on a Canadian return. A TFSA can be kept, but most contributions made while you are a non-resident cost 1% of the amount for each month until you withdraw it or move back (CRA).

A case stops being simple when you already added to a TFSA after leaving, still earn Canadian income, pay into a spousal plan, plan to return within a few years, the new country taxes these accounts, or you kept a home, spouse or dependants in Canada, since whether you are a non-resident at all decides every rule here (see Canadian tax residency). Gather your latest notice of assessment (it shows your RRSP deduction limit and unused contributions), your departure date, and statements showing the date and amount of each contribution since you left.

Do I earn new RRSP room while living abroad?

Only from Canadian work. For any part of a year you are not a resident, RRSP "earned income" counts only income from employment duties performed in Canada and from a business carried on in Canada, and not to the extent a tax treaty exempts it (Income Tax Act s. 146(1)). Salary for work done abroad adds nothing, even from your own Canadian corporation, and dividends never create room. Rent from a Canadian property usually counts only for periods when you were a resident, unless the rental is a business you carry on in Canada.

Room for a year is 18% of the previous year's earned income, up to $33,810, minus any pension adjustment from a workplace pension, plus room left unused from earlier years, which carries forward indefinitely (T4040). So the year after you leave still brings room from the salary you earned in Canada before departure; after that, new room stops unless you have Canadian earned income. The CRA bases the limit on earned income reported on Canadian returns (T4144), and the T4058 notes you may want to file to report income that creates room.

Is an RRSP deduction worth anything as a non-resident?

Only if you file a Canadian return that taxes Canadian income at regular rates. Non-residents filing a return can generally claim the same deductions as residents, including RRSP contributions up to their deduction limit (T4058). That covers a return reporting Canadian employment or business income, a section 217 return (an optional return that can recover part of the tax withheld from Canadian pension or RRSP payments) (5013-G), and a section 216 return (an optional return on net Canadian rent instead of tax withheld on gross rent). The CRA allows the RRSP deduction on a section 216 return but not twice on that return and another Canadian return for the same year (T4144).

If you have no such return, the deduction saves nothing now. You do not have to claim it: a contribution not deducted stays on your record as an unused contribution and can be deducted on a later return, within that year's limit (T4040). Contributing beyond your limit by more than $2,000 draws 1% a month; see the RRSP over-contribution guide.

Can I contribute in the year I leave and deduct it on my departure return?

Yes. The departure-year return covers your world income up to the departure date plus Canadian employment or business income after it, so a deduction there reduces tax on that income (Income Tax Act s. 114). Whether it is worth more there or on a later Canadian return depends on your rates in each year. Contributions made in the year, or in the first 60 days after it ends, can be deducted for that year up to your deduction limit (Income Tax Act s. 146(5)). Your limit for the departure year is on the notice of assessment for the year before. What else carries forward is in unused credits and losses when leaving Canada.

Can I still pay into a spousal RRSP, or move severance into my RRSP?

A spousal RRSP contribution is allowed and uses your own deduction limit, the same way as if you lived in Canada; your contributions to your own plan and your spouse's together cannot exceed your limit (T4040). The deduction still helps only against Canadian income on your Canadian return. The rule that taxes the contributor on a spousal withdrawal within three years does not apply while either spouse is a non-resident (Income Tax Act s. 146(8.7)); withdrawals are covered in RRSP cash-out before or after leaving.

Payments out of a registered pension plan, DPSP, RRSP, RRIF or PRPP can go straight to an RRSP or RRIF without non-resident withholding if the transfer is direct and you complete Form NRTA1 (5013-G). For severance (a retiring allowance), only the eligible part, based on service before 1996, transfers without withholding; the rest is withheld even if you have RRSP room (Income Tax Act s. 212(1)(j.1)). Details are in severance and final pay after leaving Canada.

Can I add money to my TFSA after leaving Canada?

You can, but it is taxed. Contributions up to your departure date are tax-free, and the year you leave still gives you the full $7,000 annual limit because you were resident for part of it. Any year you are a non-resident for the whole year adds no room (CRA).

A contribution made after the departure date, other than a qualifying transfer or an exempt contribution, owes 1% of the amount for each month that ends after the contribution and before you withdraw the whole amount (designated against that contribution) or become resident again (Income Tax Act s. 207.03). Withdrawing part of it does not reduce the tax (CRA). Both this tax and the separate tax on contributions over your room can apply to the same amount; how they are calculated, the return due by June 30 of the next year, and asking the CRA to waive the tax after a reasonable error are in the TFSA over-contribution guide.

The trap: a contribution one day after the departure date is a non-resident contribution, even inside the year's limit. Stop any automatic TFSA transfers before you leave; each one is a separate contribution.

Can I put back TFSA money I withdraw while abroad?

Not without tax until you return. Withdrawals while a non-resident are not taxed in Canada, but they are added back to your room only when you become a resident again (CRA). The CRA also warns that your country of residence may tax TFSA withdrawals. FHSA rules differ; see FHSA when you leave Canada.

What should I keep for when I return to Canada?

Keep the record of both accounts so the room can be used later.

• Your RRSP deduction limit and unused contributions, from your last notice of assessment.
• Proof of each RRSP and TFSA contribution and withdrawal made while abroad, with dates.
• Any Canadian returns you filed while abroad, since they set your RRSP room.
• Your departure date and the date you become resident again; TFSA room and withdrawals turn on both.
• If you deduct RRSP contributions on a section 216 return, the CRA corrects your deduction limit separately; check the limit in CRA My Account or on a later Form T1028 before contributing again (T4144).

See returning to Canada after years abroad for the first year back.

Example

These scenarios are illustrative; figures are in Canadian dollars.

A developer working in Singapore

He has C$40,000 of unused RRSP room and contributes C$10,000 the year after moving. His only income is his Singapore salary, so he files no Canadian return and the deduction saves nothing now. He leaves the C$10,000 undeducted and can deduct it on a later Canadian return, for example one reporting Canadian work or his income after moving back.

A nurse who adds to her TFSA after leaving

She leaves Canada on March 20 and contributes C$5,000 to her TFSA on May 10. She withdraws the full C$5,000 on August 15 and designates it against that contribution. The months ending after the contribution and before the withdrawal are May, June and July: 3 months at 1% of C$5,000, C$150 in total. She files Form RC243 with Schedule B.

A couple where one spouse stays in Canada

He moves abroad; his wife keeps working in Canada. He contributes C$8,000 of his own unused room to a spousal RRSP. The deduction is his, so it helps only if he files a Canadian return with Canadian income to reduce; otherwise he carries it forward as an unused contribution.

Different for you?

• You still earn Canadian income or rent out a Canadian home: whether a return and an RRSP deduction pay off depends on the return type; get individual tax help.
• You pay into a spousal plan or plan to move back within a few years: timing of contributions and deductions across years is worth planning; see individual tax help and returning to Canada.
• You already contributed to a TFSA after leaving, or missed a return for it: the tax runs every month until the amount is withdrawn or you return; see the TFSA over-contribution guide and get individual tax help.
• Your new country may tax RRSP or TFSA growth or withdrawals: how the two countries' rules fit depends on the treaty; get cross-border tax help.
• You want to cash out the RRSP instead: see RRSP cash-out before or after leaving.
• You live in the US now: see RRSP and TFSA after moving to the US and cross-border tax help.
• You are still planning the move: start with leaving Canada.