RDSP When You Leave Canada: Grants, Bonds and Withdrawals

RDSP and non-residents: what stops when the beneficiary leaves Canada?

The plan can stay open, but almost everything that adds money to it stops. What matters is the beneficiary's residence, not the holder's. While the beneficiary is a non-resident:

Leaving Canada does not cause a deemed sale of the RDSP: the departure-tax rule excludes a registered disability savings plan. For the rest of the departure return, see leaving Canada.

What makes a case not simple: a withdrawal soon after leaving (grants and bonds from the last 10 years come back out), a beneficiary close to 60, a move to a country that taxes the plan's growth, or doubt about whether the beneficiary has really become a non-resident. Whether someone is a non-resident is its own test: see Canadian tax residency.

What to gather before the move:

• The latest RDSP statement, showing contributions, grants, bonds and the assistance holdback amount
• The dates and amounts of every grant and bond paid in the last 10 years
• The beneficiary's departure date and new country
• Who the holder is, and whether the holder is also moving

Can I keep my RDSP if the beneficiary moves abroad?

Yes. The CRA's residence test applies when the plan is opened and at each contribution, not to keeping an existing plan open: the beneficiary must be a resident of Canada when the plan is opened and when each contribution is made. An existing plan keeps its investments and can keep growing tax-sheltered in Canada.

The plan still depends on the beneficiary's disability tax credit approval. If that approval ends, RC4460 says the holder can keep the plan open or close it, but contributions, grants and bonds stop.

Can anyone keep contributing to an RDSP from abroad?

No. No one, including parents or other family still living in Canada, can contribute while the beneficiary is a non-resident, because the beneficiary must be resident when each contribution is made (CRA).

A contribution made before the beneficiary's departure date is fine. To catch that year's grant, contribute while the beneficiary is still resident.

Do RDSP grants and bonds stop, and do the missed years carry forward?

Grants and bonds stop, and the years abroad are lost for good. The ESDC issuer guide says entitlements "do not accrue" while the beneficiary is not a resident of Canada.

The grant test is about the date of the contribution, not the date the grant arrives. A contribution made while the beneficiary was resident can still attract a grant paid after the move. Unused entitlements carry forward up to 10 years, but only for years the beneficiary was resident (ESDC; figures from RC4460).

What if only the RDSP holder moves and the beneficiary stays in Canada?

Then the plan carries on normally. The holder does not have to be a resident of Canada, so a parent who moves abroad while an adult child stays can remain holder, and contributions, grants and bonds continue as long as the beneficiary is resident and eligible.

For a beneficiary under 18, the primary caregiver's information is used to decide the child's residence. If the parent who is moving is the child's primary caregiver, confirm the child's residence before contributing (ESDC).

Can RESP or RRSP money still roll into the RDSP?

No, not while the beneficiary is a non-resident. RC4460 lists "the beneficiary is not a resident of Canada" among the conditions that block a rollover from an RESP, RRSP, RRIF or registered pension plan. These rollovers are narrow: RRSP, RRIF or pension money can come only from a deceased parent's or grandparent's plan the beneficiary depended on, and RESP income only in limited cases (RC4460). If a rollover is planned, do it before the departure date. For the child's RESP itself, see RESP when you move abroad.

If we withdraw from the RDSP, do we repay grants and bonds?

Usually, yes. A withdrawal requires repayment to the government of the least of $3 for every $1 withdrawn, the plan's value, and the assistance holdback amount: the grants and bonds paid into the plan in the past 10 years, less anything already repaid (RC4460). The issuer pays it back out of the plan's own funds, on top of the amount withdrawn (Canada Disability Savings Regulations, s. 5.3).

Moving abroad does not trigger repayment by itself. The trap is timing: a family that withdraws soon after leaving, while recent grants and bonds are still inside the 10-year window, can give most of them back. Because no new grants or bonds arrive while the beneficiary is abroad, the holdback shrinks each year as older payments pass the 10-year mark.

This repayment does not apply to payments made in or after the year the beneficiary turns 60 (s. 5.3(3)). Withdrawals are also capped: if the plan holds more grants and bonds than contributions, a withdrawal can be limited to the greater of a formula amount and 10% of the plan's value. Lifetime payments must begin by the end of the year the beneficiary turns 60 (RC4460), so a beneficiary still abroad then will receive yearly payments with non-resident tax withheld. Ask the issuer for the plan's own limits before deciding.

How is an RDSP withdrawal taxed when the beneficiary lives abroad?

Only the taxable part is taxed, and for a non-resident it falls under Part XIII. A withdrawal mixes contributions, which come back tax-free, with grants, bonds, rollover amounts and growth, which are taxable (RC4460). Section 212(1)(r.1) applies non-resident tax of 25% to the part that a Canadian resident would have had to include in income. The section 217 election that can lower tax on some pension payments to non-residents does not cover RDSP payments, so the withholding, at the treaty rate if one applies, is generally the final Canadian tax.

Whether a tax treaty lowers that rate is not settled by a single CRA table. IC76-12R8 does not mention RDSP payments and sends readers to the treaty itself; the answer depends on how the beneficiary's treaty classifies the payment. See non-resident tax rates in Canada.

The issuer reports the payment on an NR4 slip under income code 63, RDSP. To read it and use it in the new country, see the NR4 slip guide. The new country may tax the payment or the plan's growth under its own rules.

What happens to the RDSP if we move back to Canada?

Once the beneficiary is resident again, contributions, rollovers, grants and bonds restart, subject to the usual age limits. The non-resident years stay lost: no grant or bond entitlement is added for them (ESDC). Tell the plan issuer the beneficiary is resident again before contributing. For the rest of the return to Canada, see returning to Canada after years abroad.

What to check before leaving Canada with an RDSP

1. Confirm the beneficiary's departure date.
2. Make any planned contribution, and any rollover that is already allowed, before that date.
3. Ask the issuer for the assistance holdback amount and when each recent grant and bond leaves the 10-year window.
4. If a withdrawal is planned, compare the repayment now with the repayment after recent grants and bonds pass the 10-year mark.
5. Give the issuer the new address and non-resident status so withholding is correct.
6. Check how the new country treats the plan and its payments.

Example

These examples use Canadian dollars and round, illustrative numbers.

A family moves to the UK and leaves the plan invested

An RDSP holds C$60,000, including C$30,000 of grants and bonds paid in the last 10 years. The family moves and stops contributing. If they withdrew C$10,000 soon after, the repayment would be the least of 3 × C$10,000 = C$30,000, the plan's C$60,000 value, and the C$30,000 holdback, so all C$30,000 goes back, if the plan's withdrawal limit allows the C$10,000 at all. That limit bites here unless the family's own contributions exceed all grants and bonds ever paid (at least C$30,000): otherwise the year's withdrawals are capped at the greater of the lifetime-payment formula and 10% of the plan's value at the start of the year, usually C$6,000 on these numbers. The issuer takes the repayment out of the plan, not from the family: the plan would drop from C$60,000 to about C$20,000. Waiting lets older grants and bonds pass the 10-year mark first.

An adult beneficiary spends four years in the Philippines

• Years 1 to 4: the plan stays open; no contributions, grants or bonds.
• Year 5: the beneficiary returns and becomes resident again. Contributions restart, and grants restart if the beneficiary is still within the grant age limit.
• Carry-forward: only resident years count, so nothing is ever paid for years 1 to 4.

Parents contribute before a July departure

The parents contribute C$1,500 in May while the child is still resident. The child leaves in July. The grant on the May contribution can still be paid, because residence is tested on the contribution date. A contribution in August would not be allowed.

Different for you?

• You are not sure the beneficiary has become a non-resident, or you need the departure-year return done: see Canadian tax residency and get individual tax help.
• A large holdback, a planned withdrawal, or a beneficiary close to 60: the timing changes what comes back to the government; get individual tax help.
• You are moving to the US or a family member is a US citizen: the US treats Canadian registered plans differently; see Canadian registered accounts on a US return (it covers the RDSP); if the same child has an RESP, see RESP and US tax for US citizen families. Get individual tax help.
• You also have other assets to deal with on departure: see leaving Canada.
• You got an NR4 for an RDSP payment: see the NR4 slip guide.
• You are coming back: see returning to Canada after years abroad.