What happens to my RRSP and TFSA when I leave Canada?

Your RRSP: nothing happens on the way out

Registered plans are one of the few things the departure tax leaves alone. RRSPs, RRIFs, RESPs, RDSPs, and registered pension entitlements are all excluded from the deemed disposition in section 128.1 of the Income Tax Act, so becoming a non-resident does not trigger any tax inside the account. You can leave the RRSP exactly as it is, continue to hold the same investments, and let it grow tax-deferred the same way it did while you lived in Canada.

What changes is contribution room. New RRSP room is generated by earned income reported on a Canadian tax return, so once you have no Canadian employment or self-employment income, you generally stop accumulating new room. If you already have unused room from earlier years, you can still use it, but most people find there is little reason to contribute further once they are filing as a non-resident.

How RRSP withdrawals are taxed once you are a non-resident

Withdrawals stop being reported as ordinary income on a Canadian return and instead fall under Part XIII non-resident withholding tax. A lump-sum RRSP withdrawal is generally subject to 25% Canadian withholding, deducted before the money is sent to you, with no further Canadian filing required on that amount. If you convert the RRSP to a RRIF and take periodic payments instead of a lump sum, the Canada-US tax treaty reduces the rate to 15% on periodic payments that meet the treaty's conditions, which is a meaningful difference for retirees drawing the account down slowly. Whether a similar reduced rate applies depends on the treaty between Canada and your specific destination country, so it is worth confirming before you plan a withdrawal strategy.

Your TFSA: it survives, but new contributions do not

A TFSA is not deemed disposed of on departure either, and any growth inside it continues to be free of Canadian tax indefinitely, even while you are a non-resident. The restriction is on the contribution side: once you become a non-resident, you can no longer make new TFSA contributions. Any amount contributed while non-resident is subject to a 1% per month penalty tax for as long as the excess sits in the account, so this is not a rule to test. Contribution room also stops accumulating for the calendar years you are non-resident, though it resumes once you move back and become a resident again.

The other issue is that the TFSA's tax-free status is a purely Canadian concept. If you move somewhere that does not recognize it, most commonly the United States, the growth inside the account can be fully taxable there each year, and US persons may also face extra reporting obligations tied to holding a foreign account of this kind. A TFSA that felt like free money while you lived in Canada can become an administrative and tax burden once you are a US resident, which is worth weighing before you decide to keep it open rather than draw it down before you go. We go through this specific problem, and the reporting it can trigger, in can I keep my TFSA if I move to the US.

None of this affects the RRSP the same way, since the Canada-US tax treaty specifically recognizes RRSPs and RRIFs as pension arrangements eligible for deferral, a protection the TFSA was never designed with in mind and does not receive.

What about your RRIF minimums and your former employer's pension

If you have already converted an RRSP to a RRIF and are drawing the required annual minimum, becoming a non-resident does not stop the minimum payment obligation. The withholding on the minimum amount itself can, under some treaties, be reduced from the standard rate the same way other periodic payments are, though the mechanics depend on structuring the RRIF as a periodic annuity rather than a series of ad hoc withdrawals. A defined-benefit or defined-contribution pension from a former Canadian employer follows a similar pattern to the RRSP: it keeps paying out, and the payments become subject to non-resident withholding instead of ordinary income tax, with the rate again set by the applicable treaty.

None of this requires you to do anything with the pension administrator before you leave, but it is worth notifying them of your new address and non-resident status so the correct withholding rate is applied from your first payment after departure, rather than corrected months later.

Deciding what to do before you leave

For most people the RRSP is worth keeping open, since the tax deferral and treaty-reduced withdrawal rates are hard to replicate elsewhere. The TFSA decision is more personal: if your destination does not respect its tax-free status, some people choose to withdraw the balance before their departure date rather than let it become a taxable foreign account with limited practical benefit going forward. There is no single right answer, and it depends heavily on your destination country, your expected timeline for returning, and how large the account is. Someone moving temporarily for a two-year assignment weighs this very differently from someone leaving Canada permanently, since a short absence makes waiting out the TFSA restriction far more tolerable than an open-ended one.

The reverse move, bringing US retirement savings into a Canadian registered plan later, raises its own set of rules, which we cover in our 401(k), IRA and RRSP guide.

Either way, the accounts themselves are separate from everything else changing at departure. See what is departure tax in Canada for how the rest of your property is treated on the same return.

How we handle this

On a departure file we confirm the correct withholding rate on any RRSP or RRIF withdrawal, including whether a periodic RRIF strategy under the treaty makes sense compared to a lump sum, and we flag the TFSA decision early since it is easy to overlook next to the larger departure-tax calculation. For clients heading to the US, we also coordinate the TFSA and RRSP reporting position with our cross-border tax services so nothing is missed on the US side of the return.

Source: CRA — Leaving Canada (emigrants).