TFSA – NON-RESIDENT ISSUES

From Video Tax News Monthly Newsletter Dec 2021

On November 16, 2021, CRA released a Tax Tip (Understanding the tax free savings account (TFSA)) that provided the basics on eligibility for and contributions to a TFSA. The release also discussed non-residency

issues regarding TFSAs, including the following:

  • contributions by a non-resident are subject to a 1%/month tax for

each month that the contribution remains in the account while the

individual is a non-resident (Section 207.03); and

  • when an individual becomes a non-resident of Canada for tax

purposes, the TFSA can remain open. Canadian tax will not apply to

any earnings within the TFSA or to any withdrawals.

In addition, TFSA contribution room will not accumulate for any year when an

individual is not a resident of Canada throughout the entire year. As such, the

more typical tax on excess TFSA contributions (1%/month for each month

the TFSA is overcontributed, Section 207.02) often also applies where

taxpayers continue to contribute during the period that they are nonresidents.

For further discussions on these and other TFSA issues for nonresidents,

see VTN 474(9) and 455(9).

Jane Zhao