Tax payable on non-resident contributions
If, at any time during the year, your TFSA contains contributions (other than a qualifying transfer or an exempt contribution) you made while a non-resident of Canada, you will be subject to a tax of 1% per month on these contributions. For more information, see Example 1 – Tax payable on non-resident contributions.
This tax, calculated on the full amount of the contribution, will apply for each month that any portion of the amount contributed while a non-resident remains in the TFSA and will continue to apply until whichever of the following happens first:
- the contributions are withdrawn in full from the account and designated as a withdrawal of non-resident contributions
- the individual becomes a resident of Canada
An individual is not subject to the tax of 1% on non-resident contributions for the month in which the full amount of the contribution is withdrawn or, if applicable, the month in which Canadian residency is resumed. For more information, see Example 2 – Tax payable on non-resident contributions.
Unlike in the case of excess TFSA contributions where a partial withdrawal can reduce the tax payable, a partial withdrawal of a contribution made while a non-resident does not proportionately reduce the tax otherwise payable. It is necessary for the full amount of a non-resident contribution to be withdrawn in order for the full tax to no longer apply.
For any year in which tax is payable by the holder of a TFSA on contributions made while a non-resident, it is necessary to fill out and send Form RC243, Tax-Free Savings Account (TFSA) Return, and Form RC243-SCH-B, Schedule B – Non-Resident Contributions to a Tax-Free Savings Account (TFSA).
In addition to the tax of 1% per month on the contributions made while a non-resident, you could also be subject to a separate tax of 1% per month if any of the same contributions create an excess amount in your TFSA. To determine whether you have excess TFSA amounts, you will need to fill out Form RC243-SCH-A, Schedule A – Excess TFSA Amounts.
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