Canadian expatriates that have moved abroad still have a Registered Pension Plan (RPP), Registered Retirement Savings Plan (RRSP) or a Tax Free Savings Account (TFSA) in Canada. After speaking with many Canadian expats, the question remains the same, can I/we transfer our RPP, RRSP or TSFA? What are the options available at this time?
The direct answer is YES you can, Canada do set certain rules in place for the transfer to go ahead in full. Having the correct jurisdiction is crucial with a Registered Pension Plan (RPP), Registered Retirement Savings Plan (RRSP) or a Tax Free Savings Account (TFSA) for the Canadian expat.
Expat Financial Advice Online have many clients from Canada living in the UK, Thailand and the Philippines to name a few. We have experience in dealing suitable vehicles held in a jurisdiction that works for you. Let’s take a brief look at the RPP, RRSP and TFSA.
Tax Free Savings Account (TFSA)
· Money contributed are done after tax income
· Able to withdraw money tax free
· Can hold many investments such as bonds, stocks etc
· Only available from 2009
· Able to contribute $46,500 per year if you did not open an account before 2016
· Each year from 18 years of age, you can contribute $10,000
Registered Retirement Savings Plan (RRSP)
· Can hold mutual funds, GIC’s, Stocks and basket investments that are sheltered from tax
· All contributions are made pre-tax
· Tax to pay on withdrawal, most have no tax to pay due to retirement
· Max contribution 18% of gross income or $25,370 as of 2016
· Able to borrow from the funds in a home buyers plan, pay back later
Registered Pension Plan (RPP)
If you receive any of the types of amounts listed below (for example in cash or by cheque), you have to include them in your income for the year you receive them and you cannot transfer them on a tax-deferred basis. Instead, if you want to transfer these amounts to another registered plan or fund and defer the tax, make sure you inform the payer to transfer them directly.
· Amounts cannot be transferred to an RRSP if you were over 71 years old at the end of the tax year.
· The following amounts can be transferred directly to another RPP, an RRSP, a RRIF, a PRPP or an SPP:
· an RPP lump-sum payment that you are entitled to receive from your RPP
· an RPP lump-sum payment that you receive from your current or former spouses or common-law partner's RPP because they died
· an RPP lump-sum payment that you receive under a court order or written agreement relating to a division of property between you and your current or former spouse or common-law partner in settlement of rights arising from the breakdown of your relationship
What options are available?
TFSA – If you currently hold a TFSA (Tax Free Savings Account), as you have already paid tax on the entry, there is no further tax liability remaining on the transfer.
You will still require a suitable overseas account that will accept the transfer of this. Depending on the country where you relocated to, will depend on the correct jurisdiction.
An online trading account or a suitable platform will be sufficient for this transfer. Risk factors need to be determined on what should be suitable for yourself now and in the future.
RRSP and RPP – Still have your Registered Retirement Savings Plan (RRSP) or Registered Pension Plan (RPP) but no longer live in Canada? As the scheme is currently tax differed, Canada will look at holding 30% tax until a suitable jurisdiction can confirm a DT (double taxation exists).
Exit penalties may be incurred on the exit of funds within the RRSP or RPP.
An international SIPP will be more than sufficient to accommodate an RRSP or RPP transfer as it can ensure a double taxation treaty is in place. This will then give you the full flexibility in the market with a variety of funds to maximise your returns.
Speak with an advisor at Expat Financial Advice Online, were happy to answer any questions that you may have.