Ought to Canadian non-residents maintain their TFSAs?
Tax-free savings accounts (TFSAs) can stay tax-free for a non-resident of Canada—not less than from a Canadian perspective.
If a overseas nation taxes worldwide revenue, that might usually embody TFSA curiosity, dividends or capital beneficial properties. So, a non-resident might haven’t any tax benefit to conserving a TFSA. These accounts usually tend to be withdrawn and the funds taken overseas.
That stated, if the particular person expects to return to Canada, leaving their TFSA to develop tax-free may very well be advantageous. If a $50,000 account grows to $150,000 they usually re-immigrate to Canada, they might have a $150,000 tax-free account to leverage. In the event that they as an alternative withdrew their TFSA financial savings, their TFSA room would improve by that quantity however their contribution room wouldn’t in any other case develop whereas they have been overseas.
What to do with non-registered accounts
Taxable non-registered accounts are usually topic to a deemed disposition when an individual leaves Canada. It’s handled as if all of the investments have been offered on the date of the account holder’s departure, triggering any accrued capital beneficial properties and ensuing revenue tax.
If the federal tax owing is greater than $16,500 on the particular person’s remaining tax return, they will select to defer fee of the tax. That is accomplished by finishing Form T1244, Election, under Subsection 220(4.5) of the Income Tax Act, to Defer the Payment of Tax on Income Relating to the Deemed Disposition of Property.
Since there’s usually no tax benefit to leaving non-registered investments in Canada, it’s widespread to see non-residents liquidate and reopen accounts overseas. Some traders want to go away them in Canada as a result of they produce other accounts, like RRSPs, that they can not liquidate. Others maintain their investments in place as a result of they belief the regulatory surroundings in Canada greater than the one of their new nation.
Withholding tax on non-registered accounts
Should you depart non-registered accounts in Canada, they are going to be topic to withholding tax on the monetary establishment. Curiosity, dividends, and mutual fund or exchange-traded fund (ETF) distributions are usually topic to fifteen% to 25% tax at supply. The speed varies primarily based on the tax treaty between the nation of residence and Canada.
This withholding tax represents your remaining tax obligation to Canada, so you don’t want to file a Canadian tax return for this revenue.
Capital beneficial properties on securities aren’t topic to withholding tax for non-residents. Capital gains on real estate and another property are topic to Canadian withholding tax and even require the non-resident to file a tax return.