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Withdrawing from Investments When You Don’t Live in Canada
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You ask about future RRSP withdrawals. As a Swedish resident, withdrawals will be subject to a 25% Canadian Withholding Tax.
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In retirement, Registered Retirement Income Fund (RRIF) withdrawals may be subject to a 15% lower rate. But if you contribute now, and then want the money in a few years when you’re a non-resident, you’ll save no tax on contributions and be subject to 25% on withdrawals—a nasty outcome.
Canadians Investing in ISKs
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Sweden offers an Investingsparkonto (ISK) account similar to a Canadian TFSA. Instead of being subject to income tax earned on the account, the account value is subject to a flat 30% tax rate, payable at a standard income rate that varies from year to year.
The standard income rate for 2022 is 1.25%, so 30% tax is payable on 1.25% times the account value. Interest, dividends, and capital gains are typically taxed at 30% in Sweden, too, so as long as you can earn more than 1.25% on your ISK investments, you should be paying more money on that account than on a regular, taxable investment account. It would be better to invest in
It looks like an ISK account is a good option for you to consider, Kyle, even if you are temporarily in Sweden. If you return to Canada, you can use your RRSP room and contribute to the RRSP at a time when the tax deduction is actually useful to you. The TFSA room will begin to accumulate again, and you can make TFSA contributions.
RRSP and TFSA for Canadians Abroad
Till that time, you can maintain your existing RRSP and TFSA accounts. You can also have a regular investment account in Canada. Withholding tax of 10% will apply on interest income, 15% for dividends and trust (mutual fund or exchange-traded funds, aka ETFs) distributions, and no withholding tax payable on capital gains on your investments as a Swedish resident Will happen. The Canadian withholding tax would normally be eligible to be claimed against the tax on those investments in Sweden.
Canadian non-residents cannot purchase new Canadian mutual funds, but they can continue to hold existing mutual funds. Some financial institutions are more flexible than others when it comes to working with non-residents of Canada. Most will allow you to maintain an account once you become a non-resident but opening a new account as a Canadian non-resident can be difficult.
I hope this helps, Kyle. Good luck with your Canadian and foreign investments and finding out where your expat adventure will take you next!
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