Can you contribute to your RRSP and TFSA when you live abroad?

Can you contribute to your RRSP and TFSA when you live abroad?
Can you contribute to your RRSP and TFSA when you live abroad?

A reader whose daughter lives in France asked us if she could still contribute to her TFSA. The answer is yes, but under certain conditions. And what about the RRSP and the CELIAPP?

To answer this question, we must first distinguish between legal residence and tax residence, explains Daniel Harissa, financial security advisor at Lafond, Financial Services and vice-president of financial management at Waltr.

Indeed, under the Canadian tax system, income tax obligations depend on residency status. To determine this, there are several factors to take into consideration regarding your stay in Canada and abroad. If you are unsure of your status, you can determine it by answering this questionnaire on the Canada Revenue Agency website here (canada.ca/fr/agence-revenu/services/impot/impot-international -non-residents/information-has-moved/determination-your-residence-status.html).

Tax residence

“It is only by being a Canadian tax resident that one triggers rights to registered TFSA, RRSP, RESP and CELIAPP plans,” explains Daniel Harissa. For the TFSA, remember that the annual TFSA contribution limit amounts to $7,000 for 2024. The total contribution room accumulated since the creation of the TFSA in 2009 is currently $95,000 for Canadian residents who were aged at least under 18 years old on this date.

You should know that these rights accrue only when you are a tax resident of Canada. Are you a tax resident of another country? In this case, the contribution rights will not be counted. “Let’s take the example of a person who began to be a tax resident of Canada in 2023. It is only from that year that they will have access to the various registered plans,” explains Daniel Harissa. Subsequently, the contribution rights will be counted during all the years that the person will have their tax residence in Canada: for example from 2020 to 2023, the total rights are $24,500. If the person becomes a tax resident of another country, the rights then cease to accumulate.

The principle is the same for the CELIAPP (maximum of $8,000 per year). Please note that there is no contribution limit for the RESP, but that the lifetime maximum per beneficiary is $50,000.

Different rules for the RRSP

There is a nuance for the RRSP. In fact, you must not only be a tax resident to trigger contribution rights, but also earn an income. “A person who is a tax resident of Canada from 2023, but who only started earning a salary in 2024, will benefit from contribution rights only for 2024,” indicates Daniel Harissa.

These rights correspond to 18% of the income earned for the previous tax year, or the RRSP limit for the year (the lesser of these two amounts). In 2023, this ceiling was $30,780.

“One of the main advantages of contributing to an RRSP is that it gives access to tax deductions. However, if you do not declare income in Canada because you are a tax resident of another country and you are not taxed in Canada, this advantage disappears. In this case, it could be more interesting to contribute to a TFSA if you have unused contribution room. The money will grow there tax-free,” advises Daniel Harissa.

ADVICE

· Even if you no longer live in Canada, you do not lose the rights that you could have accumulated in the different plans (RRSP, TFSA, CELIAPP and RESP).

· As soon as you have accumulated rights in these plans, you can contribute to them even if you reside abroad, from an account that you would have kept in Canada for example.

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