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Leaving Canada RRSP/RRIF Clarification Help Please

Leaving Canada RRSP/RRIF Clarification Help Please

Old Feb 10th 2020, 8:16 pm
  #1  
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Default Leaving Canada RRSP/RRIF Clarification Help Please

Hi everyone,

I am a UK citizen that has been living in Canada for 7 years and have built a number of TFSA’s and RRSP’s during our time here. We are now planning on moving home to the UK in the summer and trying to get a head start on everything financial. We will definitely be taking professional advice, and have read lots of posts on here, but would like to be armed with as much information as possible prior to those meetings.

In case it matters, it’s worth pointing out that I am late 30’s, have 2 kids (both Canadian) and typically in the 12% AB provincial tax bracket and the 29% federal tax bracket. In the UK I will be in the 40% tax bracket.

TFSA’s seem simple, we will just convert these into cash prior to leaving so there should be no tax implications there.

RRSP’s seem a little more complicated. It looks like there are a few options available:
  1. Keep the money invested in the RRSP in Canada until retirement then convert to a RRIF, at which point move over 10% or the minimum payment to best suit my tax situation. This appears to have the benefit of not paying tax in Canada, as the regular monthly withdrawal payment from the RRIF is classed a pension in the UK so is only taxed there due to tax treaties between the two countries. However it appears that I will pay Capital Gains tax in the UK each year on the gains within the RRSP until retirement as it is not recognized by the UK as a tax sheltered investment. This capital gains tax assumes the RRSP is ‘UK reporting’ otherwise I understand that it would be classed as income and taxed at the applicable income tax rate.
  2. Keep the money in the RRSP until we are tax resident of the UK (non resident for tax purposes in Canada). We would plan to reset our cost base by selling all positions in the RRSP just prior to leaving and repurchasing something else (this wouldn’t be taxed within Canada as within a tax sheltered RRSP). Once classed as non resident for tax purposes we would pay 25% WHT to Canada. Assuming that the UK would only charge tax on the gain since ‘re baselining’ then this seems like an attractive option if 25% is really the only tax we would pay? Is anyone able to confirm what tax I would be expected to pay in the UK if I withdrew the full proceeds of my RRSP once in the UK?
  3. Convert my RRSP’s into a RRIF upon leaving and move the maximum 10% over each year as a periodic payment. In this scenario I believe I wouldn’t be taxed in Canada but I would be subject to UK income tax on 90% of the money transferred over.
As part of my calculation is the ‘opportunity cost’ of not moving the money. For example, a Lifetime ISA in the UK allows me and my wife to each contribute 4k GBP and get 1k GBP topped up each year for 13 years until we turn 50. With that extra government top up it seems even paying a high rate of WHT or income tax to move our money across would be worth it to get those free gains. There are other ISA’s of course which are tax free but this seems most beneficial to us. Then there is the SIPP contribution which based on my tax rate would get 20% gov’t contribution and a tax back as well. If we are only paying 25% WHT to withdraw this money in scenario 2, I feel like we wouldn’t be any worse off?

Does anyone know of a good professional to speak to (we are based in Calgary) on the UK / Canada tax implications?

I’ve seen some really great responses on here and hopefully some of you that have done this can help out with some advice.

Thanks in advance!
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Old Feb 12th 2020, 3:57 am
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Default Re: Leaving Canada RRSP/RRIF Clarification Help Please

Do be aware of your obligations taxwise when leaving Canada to live overseas... especially deemed disposition
https://www.canada.ca/en/revenue-age...emigrants.html
https://www.canada.ca/en/revenue-age...-property.html
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Old Feb 20th 2020, 6:10 pm
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Default Re: Leaving Canada RRSP/RRIF Clarification Help Please

Originally Posted by andrewsco View Post

TFSA’s seem simple, we will just convert these into cash prior to leaving so there should be no tax implications there.

Given your age and if you don't require the money, why not leave the TFSAs in Canada and allow it to grow tax free?

I may be missing something here, but this is what is quoted on the Canada gov't website:

"If you hold a TFSA when you leave Canada, you can keep it and continue to benefit from the exemption from Canadian tax on investment income and withdrawals. However, you cannot contribute to your TFSA while you are a non-resident of Canada, and your contribution room will not increase."
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Old Jun 20th 2020, 2:37 am
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Default Re: Leaving Canada RRSP/RRIF Clarification Help Please

Hi I have a Riff account did you say that you can cash them out easy or transfer them to UK I’m leaving Alberta in August love some info
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