RRSP eligibility

Hi there,

Anyone know if Canadians abroad are still eligible for RRSP contributions if you have not yet declared non-residency status. I'm guess yes since we're still subject to Canadian taxes.

Thanks.

Pretty sure you can. I do

I assume you got your answer by now.

But, remember, you pay tax when you take it out, so you better at least have claimed the deduction for your contribution. You cant claim the deduction if you dont file a return. But you can carry forward your unused deductions until you either lose the slips, or finally file.

As a RESIDENT, you will pay witholding of 10/20/30% depending on how much you pull out PER DAY (usually).
-10% on amounts up to $5,000;
-20% on amounts from $5,000 to $15,000; and
-30% on amounts over $15,000.
And you may or may not have to pay more when you file your return.

If you are really a NON-RESIDENT when you pull it, which means of course you would tell your bank, the bank should charge you 'PART XIII tax', and thats the end of it. Part XIII tax is 25% (for almost every country, tax treaty or not, see http://www.cra-arc.gc.ca/E/pub/tp/ic76- ... 2r5-e.html ). Actually not a bad option to yank out a big RSP in one pull as a non-resident, versus the 46% you could pay as a resident on a big pull. Dont forget the tax implications of this income in your country of residence.

If you try the obvious scam of pretending to be a resident, and yanking $4500 a day out until you drain the RSP, be aware that the bank could stop you, and that the Part XIII tax that should have applied, can be assessed on you -and/or- the bank. Angry bank - not good. Angry government - wait till you try to collect on your pensions, and the compounded interest will be a killer.

Again, paying tax on the withdrawel is extremely painful if you never filed for the deduction when you contributed.

Does anyone know how to buy RRSP when you are overseas? TD told me i couldn’t buy the mutual funds as i am not living in Canada, even i chose to be the Canadian resident for tax purposes.

Thanks!

Sounds like duff information to me, get hold of someone higher up and tell them you are only temporarily overseas and still resident for tax purposes.

You should never contribute to RRSPs if you are non-resident for tax purposes.

Thanks for your advice, Steve.

My situation is a little bit special. I am living in Spain and considered the resident of Spain by Spanish authority, but I pay Spanish taxes as a non-resident. It’s a special arrangement in Spain. I am afraid CRA will not consider me as a non resident for tax purposes.

I have consulted TD and they told me I cannot buy their mutual funds because I am not living in Canada.

What should I do in this case?

That sounds like some silly bank rule they came up with, so the only option is try a different bank I guess. If you're resident for tax purposes than you can contribute to RRSPs, it's that simple. Well, foreign tax rules notwithstanding, but the Canadian end of it is simple.

It is not a silly bank rule. It is the result of tighter regulations to prevent money laundering. You need to be resident in Canada in order to receive financial advice and products from a financial service provider.

While the tax law allows you to contribute to your RRSP, the fact that you are living in Spain prevents a financial service provider from handling the transaction.

Some providers might 'bend the rules', but I suspect they would only do this if you had an established relationship with them.

You should never contribute to RRSPs if you are non-resident for tax purposes.[/quote]

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I agree. But you can keep what you have contributed already I assume, to avoid the tax to be paid if one cashed it out.

-- Mon Oct 26, 2009 3:44 pm --

That sounds like some silly bank rule they came up with, so the only option is try a different bank I guess. If you're resident for tax purposes than you can contribute to RRSPs, it's that simple. Well, foreign tax rules notwithstanding, but the Canadian end of it is simple.

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Yes I remember my bank advisor telling me that I need to stop contributing to my RRSP's as a non resident...but you surely can if you continue to be a tax resident of Canada.

Just to clarify, there is no rule/regualtion against contributing to an RRSP as a Cdn non-resident. In fact the 216 return, which is strictly for non-residents, allows one to take RRSP deductions for contributions made against rental income (which btw counts toward income eligible for RRSP contribution room).

It is the US SEC rules that prevent Cdn brokers (for the most part) from accepting new monies and invest these in securities in Canada. So most banks simply have a policy to not accept it. But even a US resident (and Cdn non-resident) could buy GICs etc to put in their existing RRSP after leaving Canada. I myself did this the first year after I left and could have continued.

The truth is however, that there is no tax advantage to doing this if one has little or no Cdn income. There is however some advantage for doing it it the months immediately after leaving Canada (ie. up until the RRSP deadline of the year following departure) to lower final departure year tax, especially if one leaves canada late in the year.

But in the case of a foreign resident working in canada? He should have no problem investing in RRSP (non-securities of course). aagin., my wife did this for the 6 months she continue to commute to work in canada after she was non-resident.