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New immigrant
April 14, 2017
6:19 pm
Buzz
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How long do I need to wait to fund TFSA without penalty? I got here last month, not planning to travel abroad this year.

Someone says I must live here for more than 6 months and others say I can only fund TFSA after year end.

April 14, 2017
6:54 pm
Bill
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April 14, 2017
7:08 pm
Buzz
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I've read that page before posting the question. That page explains how a resident becoming non-resident should fund the TFSA but not the other way around.

April 14, 2017
7:44 pm
NorthernRaven
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While I wouldn't trust random internet sites (including this one) for something with significant implications like TFSA contributions, it certainly seems that new residents can contribute immediately (you do need a SIN).

Globe & Mail story here, for instance, and the CRA site does state "Any individual who is 18...and who has a valid...SIN", as long as you aren't deemed non-resident.

April 14, 2017
8:43 pm
Loonie
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I too agree that there is no obvious reason why you can't contribute immediately, assuming you have a Canadian Social Insurance Number and have immigrated here.
I wouldn't assume this would be valid for refugees pending status as landed immigrants, although it might be.

Make sure you only start counting contribution room from 2017 forward. This means you have $5500 in contribution room as of now. You can't count years you weren't here.

It would be wise to speak to CRA on the phone to allay any lingering worries. I suggest calling them three times and asking the same question each time, ensuring that you always get the same answer. Unfortunately, there is a history of people getting wrong answers from their phone staff, but three consistent answers is sufficient. Be sure to record who you spoke to and when, to be on the safe side.

April 14, 2017
9:45 pm
Buzz
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Loonie said
I too agree that there is no obvious reason why you can't contribute immediately, assuming you have a Canadian Social Insurance Number and have immigrated here.
I wouldn't assume this would be valid for refugees pending status as landed immigrants, although it might be.

Make sure you only start counting contribution room from 2017 forward. This means you have $5500 in contribution room as of now. You can't count years you weren't here.

It would be wise to speak to CRA on the phone to allay any lingering worries. I suggest calling them three times and asking the same question each time, ensuring that you always get the same answer. Unfortunately, there is a history of people getting wrong answers from their phone staff, but three consistent answers is sufficient. Be sure to record who you spoke to and when, to be on the safe side.  

Yep! Getting inconsistent answers from CRA over the phone is certainly the reason why I would post questions on forums like this, hoping to reach someone who has actually done it to share the experience.

April 14, 2017
10:06 pm
Loonie
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If you don't feel CRA telephone is sufficient, you could also consult a tax professional (after mid-May) or a tax lawyer, but that might cost money and defeat the purpose.
Stay tuned to your radio. Sometimes there are call-in shows with experts on tax this time of year. CBC radio at lunchtime has a call-in show during the week.

Something else just occurred to me. If you are an American, which I suspect you are, there are problems with US taxation of TFSAs. TFSAs aren't permitted in the US, as I understand it, and you would be taxed on them there until and unless you renounce US citizenship, which is a drastic move. This is what I hear from people here with dual citizenship. I believe this was discussed at greater length in a previous thread on this site.

In any event, no matter what country you are a citizen of, you should check on rules which might affect your contributions.

April 15, 2017
6:55 am
Bill
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The CRA site page I provided had other links, one of which takes you to the RC4466 TFSA Guide. CRA Guides are written in plain language for the average person who is willing to take a few moments to do a bit of research.

Pages 6 and 10 are the relevant ones in this case and it's pretty clear: "Any individual who is 18 years of age or older and who has a valid SIN is eligible to open a TFSA. A person determined to be a non-resident of Canada for income tax purposes can hold a valid SIN and be allowed to open a TFSA, however, any contributions made while a non-resident will be subject to a 1% tax for each month the contribution stays in the account. For more information, see “Non-residents of Canada” on page 10."

So the moment your residency status for tax purposes becomes Canada (it tells you to look at page 10 of the Guide for how you determine that) is key as that is the moment you can begin to contribute to a TFSA without penalty.

In my opinion the CRA site has very good information regarding tax matters and also, unlike other remunerated advisors (especially those in the media), is unbiased. I challenge anyone to point out an error on the site.

Also, if you know what you're talking about and provide all the facts of your case (i.e. don't leave out or misrepresent key details) CRA telephone advice is usually very good, in my experience. From what I see when people complain about getting the wrong answer they often left out or skirted key inconvenient details in the original communication. It's a fun and popular urban myth we all participate in that CRA advice is usually wrong - that's just my view.

Also, if you do note who gave you the wrong advice it might not make a difference in the end anyway. The Income Tax Act is the law and an auditor who's determined to nail you can still say sorry about the bad advice we gave you, here's what the law says. The courts also support the primacy of the law over information any individual has provided to you.

April 15, 2017
7:00 am
HIS285
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This site (http://tfsahelper.ca/for-forei.....to-canada/) says you can contribute right away:

If you are a new immigrant or permanent resident to Canada, you are allowed (and encouraged) to open a TFSA as soon as you arrive, so long as you have a valid social insurance number and are at least 18.

April 15, 2017
7:20 am
Top It Up
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Buzz said

Getting inconsistent answers from CRA over the phone is certainly the reason why I would post questions on forums like this, hoping to reach someone who has actually done it to share the experience.  

I would be extremely guarded about any advice or "first hand" information you read on any anonymous website forum.

April 15, 2017
8:59 am
Buzz
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That's right. So, I tend to ask around sometimes just to make sure.

April 15, 2017
12:34 pm
Norman1
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The CRA page Contributions suggests TFSA contribution room is earned for the year immediately after becoming resident of Canada, for tax purposes, in that year and one is 18 years or older:

TFSA contribution room

Starting in 2009, TFSA contribution room accumulates every year, if at any time in the calendar year you are 18 years of age or older and a resident of Canada.

How your TFSA contribution room is determined

An individual will not accumulate TFSA contribution room for any year during which the individual is a non-resident of Canada throughout the entire year.

The TFSA dollar limit is not prorated in the year an individual:

• turns 18 years old;
• dies; or
becomes a resident or a non-resident of Canada.

April 15, 2017
5:48 pm
Bill
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Norman1, the way I read it is that if you become a resident at any time during the year, e.g. December 31, then you get full TFSA room for that year. If you are a non-resident for the entire year, you get no room for that year and so must wait.
So, again, it's very important to determine the moment, or at least the day, you are initially considered, for tax purposes, to be a resident of Canada.

April 15, 2017
5:53 pm
Loonie
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Norman1 said
The CRA page Contributions suggests TFSA contribution room is earned for the year immediately after becoming resident of Canada, for tax purposes, in that year and one is 18 years or older:

TFSA contribution room

Starting in 2009, TFSA contribution room accumulates every year, if at any time in the calendar year you are 18 years of age or older and a resident of Canada.

How your TFSA contribution room is determined

An individual will not accumulate TFSA contribution room for any year during which the individual is a non-resident of Canada throughout the entire year.

The TFSA dollar limit is not prorated in the year an individual:

• turns 18 years old;
• dies; or
becomes a resident or a non-resident of Canada.

  

I don't get that out of it, Norman. I assume it's the "prorated" part that has drawn your attention?

To me, that says the person WILL be allowed the full contribution for the year pf arrival because it is not prorated (i.e. reduced) due to their arrival being part way through the year. But I gather you think it means that it is not prorated (i.e. allowed for only the part of the year they were here)?
In the absence of anything that says the year of arrival does not qualify, I think it must carry the former meaning, and thus the year of arrival would qualify for the full amount.

My understanding is reinforced by the other qualifiers in this section, i.e. age and death. It would make no sense to penalize an estate because the person contributed in January and died the following December as the contribution would have been made in good faith when the person was alive. Most of us who have money in the bank will contribute in January, often January 2, and die on one of the other 363 days, not expecting to have our contribution disqualified and taxed. And it says elsewhere that you can contribute as soon as you turn 18.

The problem with CRA pages, and the reason why so many phone calls from people who can read what is written are needed, is usually in their ambiguity and unstated or unclear definitions of terms.

April 16, 2017
4:59 pm
Norman1
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Bill said
Norman1, the way I read it is that if you become a resident at any time during the year, e.g. December 31, then you get full TFSA room for that year. If you are a non-resident for the entire year, you get no room for that year and so must wait.

Loonie said

I don't get that out of it, Norman. I assume it's the "prorated" part that has drawn your attention?

To me, that says the person WILL be allowed the full contribution for the year pf arrival because it is not prorated (i.e. reduced) due to their arrival being part way through the year. But I gather you think it means that it is not prorated (i.e. allowed for only the part of the year they were here)?
In the absence of anything that says the year of arrival does not qualify, I think it must carry the former meaning, and thus the year of arrival would qualify for the full amount.

I think the three of us are in agreement: There's no prorating of the TFSA contribution room. Either one receives the entire $5,500 of room for the year or one receives $0.

As Bill mentioned, if one becomes resident on December 31, then the entire $5,500 is added to one's TFSA contribution room at that point.

There is a subtle wrinkle though. Having TFSA contribution room doesn't necessarily mean one can use it. This is from the CRA page Who can open a TFSA?:

Non-residents of Canada

You can contribute to a TFSA up to the date that you become a non-resident of Canada. The annual TFSA dollar limit is not pro-rated in the year of emigration or immigration.

If you make a contribution, except for a qualifying transfer or an exempt contribution, while you are a non-resident, you will be subject to a 1% tax for each month the contribution stays in the account. …

April 16, 2017
5:51 pm
Bill
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Norman1, it's true that only residents can contribute without penalty.

In summary:

1. Anyone (resident or non-resident) 18 years of age or older with a valid SIN can open a TFSA,
2. Anyone resident in Canada for at least one day of the year gets the entire contribution room for that year,
3. You can only contribute without penalty if you're a resident on the day of your contribution.

Again, "resident" does not necessarily mean the first day you arrive in Canada, it means the day you are considered a resident for income tax purposes based on the criteria outlined in the TFSA Guide on page 10 as well as elsewhere in CRA publications.

An example: a foreigner may work in Canada for a while, maybe on an interim basis staying in a hotel or other rental premises, before they decide to permanently cease residence in their old country, sever ties there, and emigrate to and set up permanent residence in Canada. They are a Canadian resident for tax purposes at the later time.

Also, I know someone who was posted to Florida temporarily for a year but he never severed ties to Canada so he continued to be a resident of Canada for that year. Now he's been posted elsewhere in USA for 3 years and he's moving his family there and severing ties to Canada for 3 years so he will likely be considered a non-resident for that time. The issue of residency for tax purposes is not always clear cut and there's a lot of case law for those who are interested.

April 16, 2017
6:19 pm
Loonie
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then I still don't understand why Norman thinks there is an issue that would be relevant to OP. The title line is "new immigrant" so why are we discussing cases where the person may not be an immigrant? OP has said he recently arrived and has no plans to leave the country this year. Isn't that enough?

April 17, 2017
5:43 pm
Norman1
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There is no issue for this year.

The OP may become a non-resident for tax purposes in a future year.

Please write your comments in the forum.