Roth IRA and taxation in Canada

dmendel · Post by **dmendel** » Thu May 08, 2008 2:09 pm

I am US citizen living in Canada. I have a Roth IRA, but stopped contributing to it when I moved to Canada. Am I supposed to report internal earnings on the IRA on my Canadian income tax? Are these earnings taxable in Canada? Can I get a credit for taxes paid on Roth IRA earnings on 1116?

nelsona · Post by **nelsona** » Sun May 11, 2008 8:57 pm

Until 2007, you are supposed to report earnings in Canada. There is no credit available, since there is no income reported on your US return.

You can claim the Cdn tax as a deductiuon on Schedule A.

In 2008, you will have no more Cdn reporting, due to new treaty, once the rules are fianlized.

dmendel · Post by **dmendel** » Mon May 12, 2008 10:17 am

Thanks for the answer. Do you think I need to amend my returns up through this year (I moved to Canada in 2001), or will I be covered retroactively?

I did call CRA about this. Though they had no official opinion on it (they said it was a "grey area"), they quoted to me CCH's opinion, which is that internal Roth internal earnings clearly fall under treaty, and like RRSPs, do not need to be reported, though any income I draw would be taxable in Canada.

nelsona · Post by **nelsona** » Mon May 12, 2008 10:51 am

All is changed with the treaty.

There has been some 'official' CRA positiuon on this, whiuch was basically that they allowed you to DEFER the tax on the growth until you withdrew the funds (basically the same way RRSPs are treated by IRS).

It was NEVER the case that ALL the Roth money was taxed. Only the income/growth after arrival in Canada.

Finance Canada disagrees with CCH that Roth were retirement vehicles and specifically excluded them under the old treaty (that is why the NEW treaty spells out explicitly thta Roths are pensions)

You will need to wait for the regs.