Question in regards to the taxation of Roth accounts in Canada.
Is the one-time Roth election only meant to 'defer' taxes, such that any gains in the account will be taxed on withdrawal? Or is the Roth completely tax-free in Canada as it is in the USA?
TIA!
Roth Taxation in Canada
Moderator: Mark T Serbinski CA CPA
Re: Roth Taxation in Canada
The one time election ensures the cra does not tax you when you withdraw it as a Canadian resident. Just DO NOT make a contribution to the roth AFTER you move to Canada or you just messed up the tax free status. As long you don't contribute the withdrawal will be tax free in canada. Very generous considering the irs does not do the same for the tfsa. I actually just sent my information to the cra as I took up residency in 2020. The competent authority service division of the cra handles it. They actually respond to emails quickly, I just faxed my paperwork and they verified my information. Their email is CPMAPAPAG@cra-arc.gc.ca. you can also go to CRA for the list of information they want. Really a sweet deal if you have loaded up on the roth over the years.
Re: Roth Taxation in Canada
That was my initial impression, as well...but after reading the info at:
https://www.canada.ca/en/revenue-agency ... h-ira.html
I found this line:
"1.15 Any individual resident in Canada who wishes to defer taxation in Canada of income accrued in a Roth IRA should file a one-time irrevocable Election for each Roth IRA that they own."
The use of the word "defer" would imply that there will eventually be taxation in Canada. And I wondered if the value of the Roth that you tell the CRA in the election letter is deemed to be the basis when you begin withdrawals from the Roth.
https://www.canada.ca/en/revenue-agency ... h-ira.html
I found this line:
"1.15 Any individual resident in Canada who wishes to defer taxation in Canada of income accrued in a Roth IRA should file a one-time irrevocable Election for each Roth IRA that they own."
The use of the word "defer" would imply that there will eventually be taxation in Canada. And I wondered if the value of the Roth that you tell the CRA in the election letter is deemed to be the basis when you begin withdrawals from the Roth.
Re: Roth Taxation in Canada
I'm not a tax pro but I've done a lot of research on this including consulting with cra and cross border tax experts. As long as you do what I mentioned in the previous post, it will be tax free in Canada. It follows the us-canada tax treaty in which the cra treats the roth just like the irs would treat it.
Re: Roth Taxation in Canada
Also, I think they need the value upon taking residency in case you contribute after you become a resident ( which you should not do). If you do contribute, then they can tax you, probably using the amount as the tax basis. Do not contribute and you cannot get taxed.
Re: Roth Taxation in Canada
The meaning of "defer" in this case refers to the the fact that if you do not file the election, you are by default required to pay tax on your Roth income year-over-year.
So you are, first off, deferring taxation. Subsequently, you are requesting that the account be considered tax-free (to the extent that it is tax-free in the US) at the time of withdrawal, so long as no "Canadian contribution".
So you are, first off, deferring taxation. Subsequently, you are requesting that the account be considered tax-free (to the extent that it is tax-free in the US) at the time of withdrawal, so long as no "Canadian contribution".
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
Re: Roth Taxation in Canada
at the time of withdrawal -> UNTIL the time of withdrawal.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
Re: Roth Taxation in Canada
That's great to hear, thank you very much.
One more question regarding the Roth election. I noticed in the link I posted earlier that the instructions provided state the letter should be mailed to CRA in Ottawa. I was told by my accountant that my Roth election was sent by EFILE. Is that correct, or should it have been mailed? Is there any way to find out if the CRA has received and processed the election? I'd hate to find out 20 years from now that they didn't receive it.
One more question regarding the Roth election. I noticed in the link I posted earlier that the instructions provided state the letter should be mailed to CRA in Ottawa. I was told by my accountant that my Roth election was sent by EFILE. Is that correct, or should it have been mailed? Is there any way to find out if the CRA has received and processed the election? I'd hate to find out 20 years from now that they didn't receive it.
Re: Roth Taxation in Canada
I do not believe there is a method of sending this letter included with your e-filed return. I would press him on that.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
Re: Roth Taxation in Canada
I could not e-file. You can mail it or fax it, both are located in the cra website under treatment of Roth IRA where they list required information. I faxed mine to 613-990-7370. They verified to me that they received it and the information is correct and was put on file in my cra account. The website email I mentioned in previous reply was whom I communicated with.