It is understanding that Roth IRA, if set up before becoming a resident of Canada, would not be taxable in Canada. Also, the tax free status would apply to any future growth within the Roth IRA. However, I saw couple of articles that cast doubt in my understanding:
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Contributions to Roth IRA's are not deductible for U.S. taxpayers under U.S. rules and not taxable when withdrawn, therefore it would seem that CRA would not tax Roth IRA withdrawals as per the above general rule. However, CRA does tax ongoing income earned inside Roth IRAs, as the income is earned. Interest, dividends, and capital gains accumulated inside a Roth IRA are not tax-deferred in Canada as they are in the U.S. These earnings should be reported to Canada as investment income, with tax paid on the income as it accrues.
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Annual earnings
Since Canada doesn't recognize a Roth IRA as a tax-exempt plan, technically speaking, the annual earnings, be they income or gains, would normally be subject to annual Canadian taxation. How they're taxed, however, will depend on the type of Roth IRA (a trust, a custodial account or an annuity) and the rules governing Canadian taxation of these plans are extremely complex.
Luckily, Canadian residents who hang on to their Roth IRAs need not worry about annual taxation if they elect under paragraph 7 of Article XVIII of the Canada-U.S. tax treaty to defer Canadian taxation on any earnings in the plan but that are not distributed during the year. That being said, it is the CRA's opinion that if such an election is made, the earnings (but not the contributions) would ultimately be taxable in Canada when withdrawn from the Roth IRA.
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Can you please clarify?
Roth IRA taxable in Canada?
Moderator: Mark T Serbinski CA CPA
Obviously, even without knowing the source of this article (it's really bad form to copy information with citing the source, eh) I know thta it is out-of-date.
Roth rules for Canada were revamped in the last protocol.
Roth rules for Canada were revamped in the last protocol.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best