Forced by National Bank to close my RRSP

[zonderzug]

A decade ago I left Canada but kept my RRSP account open, nothing out of the ordinary here.

Now, the bank want me to close my RRSP; the thing is, it is not possible for a non-resident to open a new RRSP account, making it impossible to transfer to another bank.

Thus, forcing my to cash out the whole RRSP, paying 25% tax in Canada AND in my current country (tax treaty may help here)

While this is undoubtedly unethical (yeah, a bank, so surprised), is it even legal ?

Any idea on how to fight/mitigate such situation?

 

[rockwell21hr]

@zonderzug They don’t really HAVE to keep you or your accounts. As far as the law is concerned I don’t see anything wrong. As you left more then 10y ago I’m pretty sure you are not a tax citizen anymore, which might be they reason why your bank is forcing you to close the account.

 

[missh]

@rockwell21hr You cease to be a tax resident immediately when you leave Canada.

 

[rockwell21hr]

@missh 6 months in most cases.

 

[missh]

@rockwell21hr You cease to be a resident of Canada based on the date you take up residency in a new country. All you do is put a date on your final Canadian tax filing in the box for when you left Canada. If CRA questions that they will ask you to fill out a form with a bunch of questions that will be used to determine your residency status.

The 180 days is the maximum amount of time you can spend in Canada as a non-resident without becoming a resident for tax purposes.

 

[missh]

@zonderzug The question is why are they asking you to close your RRSP account?

Also have you confirmed that you can't open a new RRSP and transfer out? That doesn't sound right to me.

 

[quivermum]

@missh You think non-Canadian residents should be able to open an RRSP?

That’s as likely as a Canadian owning a 401k.

 

[missh]

@quivermum Opening an account is not the same as contributing to it.

I'm leaving Canada this year but I am allowed to keep my TFSA. I can not contribute to the TFSA once I leave and any funds I take out I can't put back. That makes sense but I don't see why I should be prevented from changing brokers if all I am doing is transferring accounts.

 

[quivermum]

@missh As a non-resident you aren’t allowed to contribute to Canadians retirement savings plan, this sounds sensible.

The main reason you’d open a brokerage is to trade or transfer, which non-residents can’t do. If you are still a resident, you can open an account, and transfer.

Source for legitimate info:
https://www.canada.ca/en/revenue-ag...=1&setlang=en-CA&safesearch=moderate#P44_1116

“If you become a non-resident of Canada, or are considered to be a non-resident for income tax purposes:

you will be allowed to keep your TFSA and you will not be taxed in Canada on any earnings in the account or on withdrawals from it
no TFSA contribution room will accrue for any year throughout which you are a non-resident of Canada
any withdrawals made during the period that you were a non-resident will be added back to your TFSA contribution room in the following year, but will only be available if you re-establish your Canadian residency status for tax purposes
You can contribute to a TFSA up to the date that you become a non-resident of Canada.”

 

[quivermum]

@missh Fact remains, you’re not allowed to open an account as a non-resident.

Which makes absolute sense. Otherwise foreign entities could fuck our markets while being tax advantaged.

 

[missh]

@quivermum Your reason makes no sense.

RRSPs and TFSAs have zero value to foreign entities.

Non-resident entities are not taxed in Canada and you don't have to be a Canadian resident to invest in stocks that trade on Canadian exchanges.

TFSAs and RRSPs are highly restricted accounts that nobody would want except for the tax advantages but those tax advantages are only available to people who are subject to Canadian tax and foreign-entities are not. Why would anyone accept all the horrible parts of these accounts while not getting the one benefit that they offer?

Further, these accounts have contribution limits so even if a foreign entity managed to get one open their contribution limit would be $0 so they would have an account that offers them zero benefits and comes with a lot of restrictions and which they can't use.

I'm debating if I'll keep my TFSA running after I leave and I probably won't but if I did I would absolutely expect to be able to change financial institutions if for some reason I wanted to.

 

[quivermum]

@missh Absolutely not true. If you’re a foreigner who has left Canada with plans to return. Keeping your RRSP open has tons of value, being for retirement and all… also, TFSA is a shelter against taxes, and RRSP a shelter against US withholding taxes. How is this not beneficial?

There is value, you just can’t see it. If you plan on returning, do your homework. It may be worth keeping open.

 

[missh]

@quivermum If you're a Canadian living elsewhere you are allowed to keep both those open.. That is not the topic. The topic is would there be any benefits from someone who is not currently a resident of Canada to open either of these accounts while living somewhere else -- the answer is no.

The only value in keeping the TFSA open would be should I return then the size of the account from which I could generate returns tax free would be greater. That is a benefit but not one that is worth it when in the negatives you have much lower returns because of TFSA limitations and then add in a low probability of ever wanting to be subject to Canadian taxes again.

 

[quivermum]

@missh Jesus Christ. Can’t fix stupid.

 

[simplywell]

@zonderzug Hi - that is absolutely legal ; non-residents cannot have RRSP (even without contributing to it). Check for a tax treaty with the country you live in to avoid double taxation.