Canadian Departure tax and Roth IRA strategy

[JohnToFire]

Best I can understand is there is some uncertainty whether the assets in a Roth IRA are subject to Canadian departure tax even though there is a clear option to elect to defer taxation in Canada (and therefore in the same cases as the US not be taxed).

So I have an idea for a strategy: (More than 5 years after last contribution and more than 5 years after arriving in Canada) Just before departing (after 59.5), start a 60 day roth ira rollover. Roll it in to another roth ira shortly after arriving in the US. It seems clearer than leaving it in the roth ira, this would not have departure or other tax in Canada. This seems safer than relying on some interpretation of the canadian departure tax to Roth IRA. Am I missing something ?

I happen to be a dual citizen but I think this is an option with other visa/citizenship statuses

[nelsona]

There is no ambiguity on this: Roth IRAs are considered US pensions. The treaty CLEARLY states that US pensions that are not taxable in a certain year, cannot be taxed in Canada. Assuming you correctly filed the Roth declaration, and have not otherwise broken the Roth, it cannot be taxable in any way by Canada.


I'd be interested in where you got your mis-information.

[JohnToFire]

>> I'd be interested in where you got your mis-information
Thanks. Not sure Iagree it is misinformation at this point

One place I got it is the link just below. But I recall seeing it in multiple places.
https://www.taxintl.com/potential-pitfa ... 0the%20U.S.
It says:
"The present unsettled status of Canada’s departure tax on individuals who relinquish Canadian residency while owing a Roth."

The update to Income Tax Technical News No 43 which I take to be income-tax-folio-s5-f3-c1 did not clarify this issue
https://www.canada.ca/en/revenue-agency ... h-ira.html

One thought from looking at the treaty myself is that it does not say anything about taxes upon leaving residency:
"Pensions and annuities arising in a Contracting State and paid to a resident of the other
Contracting State may be taxed in that other State, but the amount of any pension included in income for
the purposes of taxation in that other State shall not exceed the amount that would be included in the
first-mentioned State if the recipient were a resident thereof"

[nelsona]

The original and update clearly state that a Roth on which the election described has been made, and where no further Canadian contribution has been made is consider a PENSION -- as I stated earlier.

That makes it 100% subject to the treaty article on pensions, which, so you stated, forbids one country from considering it as income if the originating country does not.

if your Roth is described above, you have no worries.