FHSA when you leave Canada: keep, transfer or close

FHSA non-resident rules in short

An FHSA you opened while resident in Canada stays open after you leave. The CRA says a non-resident can continue to participate normally with one exception: no qualifying (tax-free) withdrawal to buy a home while non-resident.

The case is not simple if you plan to come back and buy, if you are moving to the US, if a spouse also holds an FHSA, or if you are buying a home close to your departure date. Gather your FHSA statements, the date you opened your first FHSA, any Form RC725 you gave your issuer, the date you became a non-resident, and the dates you owned and lived in any home, in Canada or abroad.

Can I keep my FHSA if I move abroad?

Yes. Becoming a non-resident does not close an FHSA or force a withdrawal. You could not open a new one now: an FHSA can be opened only by a qualifying individual, who must be resident in Canada, at least 18, and a first-time home buyer when the account is opened.

Your issuer can apply non-resident withholding only if it knows you are a non-resident, so it will need your new status and address.

Is my FHSA part of departure tax?

No. When you leave Canada, you are treated as selling most property at fair market value, but an FHSA is an "excluded right or interest" under section 128.1(10) of the Income Tax Act, paragraph (a)(iii.3), alongside RRSPs, RRIFs and TFSAs. The investments inside it are not deemed sold on departure. For the rest of your departure return, see leaving Canada.

Can a non-resident contribute to an FHSA and deduct it?

Likely yes, but the CRA does not say so directly. Its non-resident page says only that you can "continue to participate normally"; it does not deal with contributions or room for non-residents in so many words. Finance Canada's design note said taxpayers would be allowed to contribute to existing FHSAs after emigrating, but that note is background, not law.

The usual limits apply: $8,000 of participation room in the year you open your first FHSA, and a cap of $40,000 on total contributions and RRSP transfers. The deduction is claimed on a Canadian return. A non-resident with no Canadian income to report gets no current benefit from it, though the deduction limit in section 146.6(5) is cumulative, so an amount not deducted can be claimed in a later year. Money contributed while abroad can come out tax-free only as a qualifying withdrawal after you are resident again, or by direct transfer to an RRSP or RRIF; any other withdrawal is taxable on the full amount, with no credit for contributions you never deducted.

For TFSA and RRSP contributions abroad, see contributing to an RRSP or TFSA after leaving Canada.

Can I buy a home with my FHSA while living abroad?

No. A qualifying withdrawal requires you to be resident in Canada from your first qualifying withdrawal until you acquire the home (or die). Other conditions also apply: Form RC725; a written agreement to buy or build a qualifying home in Canada by October 1 of the year after the withdrawal; the home not acquired more than 30 days before the withdrawal; and an intent to live in it as your main home within one year.

The trap is timing. If you make a qualifying withdrawal and then become a non-resident before the home is acquired, the residence condition fails, so the money is not a qualifying withdrawal and is taxable under section 146.6(6). To keep the withdrawal tax-free you must be resident on the day you make it and stay resident until you acquire the home: complete both the withdrawal and the purchase before you leave, or wait until you are resident again. The test applies to each holder: a spouse who stays resident can still make a qualifying withdrawal from their own FHSA. For buying a Canadian home from abroad in general, see buying a home in Canada while living abroad.

What happens if I withdraw from my FHSA as a non-resident?

Any withdrawal that is not a qualifying withdrawal or a direct transfer is a taxable withdrawal. For a non-resident, Part XIII tax applies to an FHSA payment under section 212(1)(y), and the issuer withholds 25% unless a tax treaty lowers the rate (CRA). Treaty rates are in IC76-12; see non-resident tax rates in Canada. The withheld tax is generally your final Canadian tax on it: unlike RRSP payments, FHSA payments are not among those a non-resident can elect to report on a Canadian return under section 217.

Closing before you leave is different: the withdrawal is income on your departure-year return, taxed at your marginal rates with your other income for the resident part of the year. After you leave, the flat non-resident rate applies instead. Which costs less depends on your income that year and the treaty rate where you move.

The issuer reports the withdrawal on an NR4 slip:

Your new country may also tax the withdrawal. That depends on its law and its treaty with Canada.

Can I move my FHSA to my RRSP instead of closing it?

Yes. A direct transfer from your FHSA to your RRSP or RRIF is tax-free and does not reduce your unused RRSP deduction room. The transfer must go issuer to issuer under section 146.6(7). The transfer is fully tax-free only if you have no excess FHSA amount (contributions beyond your room); if you do, only the account's value minus that excess moves tax-free. Section 212(1)(y) excludes the transferred portion from non-resident tax.

Taking the cash out and then contributing it to an RRSP is not a direct transfer. That is a taxable withdrawal followed by a contribution that uses RRSP room. Later RRSP or RRIF payments follow the non-resident rules; see cashing out an RRSP before or after leaving Canada.

When must my FHSA be closed?

Your FHSA must be closed by the December 31 shown for whichever of these happens first (CRA definitions):

The clock keeps running while you live abroad. If the account still holds money when the period ends, section 146.6(17) treats its full fair market value as received by you, which is taxable (NR4 box 76 for a non-resident). A direct transfer to an RRSP or RRIF before then avoids that inclusion.

I plan to come back and buy: keep, transfer or close?

The answer turns on whether you will be resident again, still a first-time home buyer, and inside the participation period when you buy.

A home abroad counts. If you own and live in a home as your main residence at any time from the start of the fourth calendar year before the withdrawal until 31 days before it, the withdrawal is not a qualifying withdrawal (section 146.6(1)). Buying where you move can shut the tax-free route for years after you return.

For the return year, see returning to Canada after years abroad.

Does my new country tax my FHSA?

Canada's rules do not bind your new country, which may tax the growth each year or on withdrawal. This page does not cover foreign rules. If you are a US citizen or green card holder, see TFSA and FHSA for US citizens.

Example

All figures are in Canadian dollars and illustrative.

Leaving for good, transfer to an RRSP

An FHSA holds $24,000 and the owner moves to Australia permanently. A direct transfer moves the full $24,000 into an RRSP with no Canadian tax and no RRSP room used. Later RRSP or RRIF payments are taxed under the non-resident rules.

Closing the FHSA from abroad

The same owner withdraws the $24,000 instead. It is a taxable withdrawal: the issuer withholds 25% ($6,000) unless the treaty lowers it, and issues an NR4 with $24,000 in box 74.

Abroad for two years, then coming back to buy

• Year 1: the owner leaves Canada and keeps the FHSA open. No withdrawal.
• Year 2: still abroad. The participation clock keeps running.
• Year 3: the owner is resident again. If the owner did not own and live in a home, in Canada or abroad, in that year or the previous four, and is inside the participation period, a qualifying withdrawal is possible, provided residence continues until the home is acquired.

Different for you?

• You made a qualifying withdrawal and are leaving before the purchase closes: the residence condition is at risk; get individual tax help before you go.
• You are moving to the US: see TFSA and FHSA for US citizens and get individual tax help.
• You own and live in a home abroad and plan to return and buy: your first-time buyer status may be gone for years; get individual tax help.
• You already closed the FHSA and the slip or withholding looks wrong for your residence: get individual tax help.
• You also have a Home Buyers' Plan balance: see HBP balance when you leave Canada.
• You want to cash out the RRSP after a transfer: see cashing out an RRSP before or after leaving Canada.
• You plan to come back and buy, or your spouse also holds an FHSA: the timing of residence, purchase and the participation period decides the result; get individual tax help.
• Your whole departure year: see leaving Canada.