TFSAs outside Canada

Yes, you can own a TFSA when you are a non-resident of Canada.  Although you do not earn new TFSA room while you are a non-resident, the previously earned room does not disappear.

You cannot however contribute to that TFSA while you are not a Canadian resident.  If you do, expect to pay a penalty of 1% per month on the full amount of the contribution until you have withdrawn the overpayment.  A partial withdrawal will not reduce the tax calculation.

If you return to Canada, or repay the over-contribution, no further penalty will be assessed.  The penalty is not levied on the month you make the repayment - so be sure to make the repayment at the end of the month rather than the beginning of the next month.

You need to fill out an RC423 - TFSA Return, along with a Schedule B - Non-resident contributions to a TFSA.  The return is required to be filed by July 1 of the next calendar year.

It is not a good idea to assume that "what they don't know, won't hurt them".  Because there are, of course, penalties for late or non-filing of the return that will increase the amount you owe to the CRA.

More TIEAs signed

They didn't have to negotiate much more...

Guernsey and Isle of Man both signed Tax Information Exchange Agreements with Canada this week.

Jersey - not cows

When I think of Jersey and Guernsey, I think of cows.  

But these are also two jurisdictions that are consider tax havens.  

Just because you invest in a company that is located in a tax haven, does not mean that you are avoiding tax.  If you are properly reporting income from those investments in your home country that requires worldwide income to be reported.

As well as having tax laws that are favourable to non-residents, they are "secrecy jurisdictions" where it was very difficult, if not impossible for other governments to determine if their domestic tax laws were being followed by investors in these countries.

Canada will now be able to get the information necessary to make those determinations - the Tax Information Exchange Agreement between Canada and Jersey was signed January 12.  

An agreement with Guernsey is still being negotiated.

Busy 2010

Okay, if it feels like I dropped off the face of the earth for the latter half of 2010.

Not really, just been super busy.

My blog posts are starting again in 2011.

For those of you who have been asking, an updated version of my book "Who gets my tax dollars" will be ready for e-publication early in 2011 . . . I will let you know as soon as it is published.