When you move abroad from Canada, you may wonder about the fate of your Registered Retirement Savings Plan (RRSP).
A Canada RRSP is a tax-advantaged investment account designed to help Canadians save for retirement. However, the status of your RRSP can change when you become a non-resident of Canada.
If you are looking to invest as an expat or high-net-worth individual, which is what I specialize in, you can email me (advice@adamfayed.com) or WhatsApp (+44-7393-450-837).
This includes if you are looking for a second opinion or alternative investments.
Some of the facts might change from the time of writing, and nothing written here is formal advice.
RRSP Contribution and Non-Residency
As a Canadian expat, you can still contribute to your RRSP account as long as you have enough contribution room, your earned income meets eligibility requirements, and report your income to the Canada Revenue Agency (CRA).
However, the tax benefits of contributing to an RRSP may vary based on the tax treaty between Canada and your country of residence. It’s essential to understand the tax implications and whether your contributions will be tax-deductible both in Canada and in your new country of residence.
Maintaining Your RRSP Account
Even if you move abroad, you can keep your RRSP account open and continue to manage your investments.
Many financial institutions in Canada allow non-residents to maintain their RRSPs, but it’s crucial to inform your financial institution about your change in residency status.
Some institutions may have specific requirements or restrictions for non-resident RRSP holders, so it’s advisable to seek guidance from your financial advisor or the institution holding your Canada RRSP.
Tax Considerations and RRSP Withdrawals
When you decide to make withdrawals from your RRSP as a non-resident, the financial institution is required to withhold tax based on the Canadian tax rates.
However, your withdrawals may also be subject to taxation in your country of residence, depending on the tax laws and regulations there. It’s advisable to consult with a tax professional who is knowledgeable about both Canadian and international tax laws to understand the implications of RRSP withdrawals as a non-resident.
Potential Alternatives
As a non-resident, you may consider alternative retirement savings options that align with the tax laws and regulations of your new country of residence.
These alternative options may include local retirement savings accounts, pension plans, or other tax-advantaged investment vehicles. Understanding the retirement savings options available in your new country can help you make informed decisions about managing your finances and planning for retirement abroad.
Canada RRSP withdrawal options for non-residents
You have several options when it comes to your RRSP withdrawals as a non-resident. One option is to withdraw the full amount from your RRSP. However, as mentioned earlier, this will result in a higher withholding tax rate of 25%. It’s important to consider the tax implications before making a decision.
Another option is to convert your RRSP into a Registered Retirement Income Fund (RRIF) or an annuity. By doing so, you can continue to receive regular payments from your RRSP, subject to the withholding tax rate. This option provides you with a stream of income in retirement while minimizing the tax impact.
Alternatively, you can choose to leave your RRSP as is and let it continue to grow tax-deferred until you reach the age of 71, at which point you will be required to convert it into a RRIF or annuity.
This option allows your investments to potentially grow over time, but you will need to consider the tax implications upon conversion.
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