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Non-Resident TFSA & Investments - CRA Calling

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[OP]
Jr. Member
Aug 5, 2007
189 posts
23 upvotes

Non-Resident TFSA & Investments - CRA Calling

Please move this if it is in the wrong forum.

I have a friend who is a non-resident of Canada (living abroad for past couple of years). His bank still had his address listed within Canada (he had listed his brothers house for correspondence).

A year ago, he started up an non-registered investment account. While talking to the bank financial adviser, he mentioned he was living abroad and a non resident (verbal only). His other friend at the time also suggested maxing out his TFSA (Not knowing that a non-resident, TFSA contributions accumulate a steep 1% monthly penalty).

Long story short, the CRA recently sent my friend a letter asking him to file his taxes. The bank had sent him a T5 slip, which they send to resident investments. He requested the bank instead provide him with an NR4, which is a non-resident investment slip. The bank said they would look to rectify the issue.

The bank then noticed the TFSA issue, and declined to do anything for him, stating he had signed the forms which showed a mailing address in Canada. My friend assumes that they do not want to rectify the T5/NR4 issue, as that may lead to them being responsible for the TFSA penalties.

What are my friends options now considering the following:

- The forms he signed to open up the accounts required both the Husband and Wife to sign as it was a joint account. The bank adviser at the time told my friend (the husband) to go ahead and sign both lines to speed up the paper work, since his wife was not available. Is this an avenue a reviewing panel/lawyer can push/work with?

- Would the CRA be lenient on the 1% monthly TFSA penalty tax considering the circumstances?

- Any other options you guys can think of?

Thanks for your time.
19 replies
Deal Fanatic
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Jan 27, 2007
5079 posts
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Peterborough
"Friend" needs to pay up.

Obvious "innocent" example of attempting to shield funds from taxation in Canada and home country.
[QUOTE]I know you are, but what am I.... ;) [/QUOTE]
Deal Fanatic
Nov 22, 2015
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bender2k wrote: - The forms he signed to open up the accounts required both the Husband and Wife to sign as it was a joint account. The bank adviser at the time told my friend (the husband) to go ahead and sign both lines to speed up the paper work, since his wife was not available. Is this an avenue a reviewing panel/lawyer can push/work with?

- Would the CRA be lenient on the 1% monthly TFSA penalty tax considering the circumstances?

Thanks for your time.
Impossible. TFSA cannot be joint, so there's nothing to work with there. If they opened a joint account it would have been chq/sav or non-registered.

There's a form on the CRA website that your friend can fill out to request an exception. He can explain the whole story on the form, and it will be up to CRA to decide.
[OP]
Jr. Member
Aug 5, 2007
189 posts
23 upvotes
dutchca wrote: "Friend" needs to pay up.

Obvious "innocent" example of attempting to shield funds from taxation in Canada and home country.
Or maybe it is a case of a Canadian living abroad who had funds sittings in a non-interest chequing account in a canadian bank and was ill-advised by the people around him to invest it in a TFSA instead. Not everyone is trying to cheat the system.
[OP]
Jr. Member
Aug 5, 2007
189 posts
23 upvotes
superfresh89 wrote: Impossible. TFSA cannot be joint, so there's nothing to work with there. If they opened a joint account it would have been chq/sav or non-registered.

There's a form on the CRA website that your friend can fill out to request an exception. He can explain the whole story on the form, and it will be up to CRA to decide.
Would opening up a non-registered account require the signature of the significant other account for a joint account then? Because both names had shown up on the new account sign up forms, and the bank manager told him the form had been signed incorrectly in the initial investigation. It may not have been on the TFSA I guess.
Deal Expert
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Jun 9, 2003
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Markham, ON
oh snap...


OP ( "friend" :lol :) opened pandora's box...
[OP]
Jr. Member
Aug 5, 2007
189 posts
23 upvotes
thelefteyeguy wrote: oh snap...


OP ( "friend" :lol :) opened pandora's box...
I'll have you know OP is a resident and happily pays his taxes every april. and posts good deals on electronics once in a blue moon.
Deal Fanatic
Nov 22, 2015
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bender2k wrote: Would opening up a non-registered account require the signature of the significant other account for a joint account then? Because both names had shown up on the new account sign up forms, and the bank manager told him the form had been signed incorrectly in the initial investigation. It may not have been on the TFSA I guess.
Of course. Someone will be reprimanded for opening a joint non-reg account with a fraudulent signature. However, that has nothing to do with the CRA; you won't be able to leverage that for a tax exemption.
[OP]
Jr. Member
Aug 5, 2007
189 posts
23 upvotes
superfresh89 wrote: Of course. Someone will be reprimanded for opening a joint non-reg account with a fraudulent signature. However, that has nothing to do with the CRA; you won't be able to leverage that for a tax exemption.
I was thinking more along the lines of the fraudulent signatures being used against the bank to demonstrate their lack of due diligence. The friend still lives abroad and is still a non-resident, and needs the bank to rectify it on their end.
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Nov 22, 2015
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bender2k wrote: I was thinking more along the lines of the fraudulent signatures being used against the bank to demonstrate their lack of due diligence. The friend still lives abroad and is still a non-resident, and needs the bank to rectify it on their end.
How? Is your non-resident friend going to take them to small claims court? Furthermore...the bank is not required to exercise due diligence regarding registered plan limits. As long as they're sure that you are who you say you are, and you provide a legitimate SIN number not starting with a 0 or 9, they don't care about overcontributions at all - that's 100% the customer's problem.

If someone goes to a bank and asks to contribute 100K to a TFSA, sure, a good rep might ask if you're sure, and explain that there may be tax consequences. However, if they just want the sale, they are by no means obligated to tell you anything and may proceed as long as you sign the document.
[OP]
Jr. Member
Aug 5, 2007
189 posts
23 upvotes
superfresh89 wrote: How? Is your non-resident friend going to take them to small claims court? Furthermore...the bank is not required to exercise due diligence regarding registered plan limits. As long as they're sure that you are who you say you are, and you provide a legitimate SIN number not starting with a 0 or 9, they don't care about overcontributions at all - that's 100% the customer's problem.

If someone goes to a bank and asks to contribute 100K to a TFSA, sure, a good rep might ask if you're sure, and explain that there may be tax consequences. However, if they just want the sale, they are by no means obligated to tell you anything and may proceed as long as you sign the document.
The friend has been in contact with his bank by email for the past couple of months, and he still has windows with arbitrators (within the bank itself, as well as others such as the mutual funds dealers association of canada). He will be in Canada for a couple of weeks in a few months, and he's working on a plan of action so that he can try and resolve it in his limited timeframe.

From the sounds of it, best case scenario would be the cra exempt him from penalties, and the bank as a result agree to rectify the whole T5/NR4 situation, shifts the tfsa into the non-registered investment account, and withdraw the required taxes from the previous years.

Thanks for your input superfresh89. Always nice to see there are still helpful people on this forum within the sea of trolls and wannabe investigators.
Deal Fanatic
Nov 22, 2015
5781 posts
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bender2k wrote: The friend has been in contact with his bank by email for the past couple of months, and he still has windows with arbitrators (within the bank itself, as well as others such as the mutual funds dealers association of canada). He will be in Canada for a couple of weeks in a few months, and he's working on a plan of action so that he can try and resolve it in his limited timeframe.

From the sounds of it, best case scenario would be the cra exempt him from penalties, and the bank as a result agree to rectify the whole T5/NR4 situation, shifts the tfsa into the non-registered investment account, and withdraw the required taxes from the previous years.
I don't think you get it.

It's highly unlikely that the bank will be able nor willing to rectify the situation. Ultimately, they are not responsible in any case.

Your friend needs to withdraw the overcontribtued amount immediately and either contact the CRA or submit the form I mentioned ASAP. The longer he waits, the less likely CRA will approve the request.

Or, he can keep up with the back and forth for a few more months but he should be prepared to eat the 1%.
Sr. Member
Feb 10, 2015
606 posts
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bender2k wrote: I was thinking more along the lines of the fraudulent signatures being used against the bank to demonstrate their lack of due diligence. The friend still lives abroad and is still a non-resident, and needs the bank to rectify it on their end.
It isn't the bank's responsibility to make sure that you are using your TFSA correctly. That is on you.
[OP]
Jr. Member
Aug 5, 2007
189 posts
23 upvotes
superfresh89 wrote: I don't think you get it.

It's highly unlikely that the bank will be able nor willing to rectify the situation. Ultimately, they are not responsible in any case.

Your friend needs to withdraw the overcontribtued amount immediately and either contact the CRA or submit the form I mentioned ASAP. The longer he waits, the less likely CRA will approve the request.

Or, he can keep up with the back and forth for a few more months but he should be prepared to eat the 1%.
I will let him know about the CRA form immediately. Thanks for your help.
[OP]
Jr. Member
Aug 5, 2007
189 posts
23 upvotes
DanTh3Man wrote: It isn't the bank's responsibility to make sure that you are using your TFSA correctly. That is on you.
All the bank needs to do is change the T5 into an NR4, and withhold tax amounts, which they were willing to do until they noticed the TFSA issue. That's why I'm thinking if the TFSA issue can be settled with the CRA, the bank may be willing to rectify the T5/NR4 issue.
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Jan 30, 2012
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TORONTO
superfresh89 wrote: As long as they're sure that you are who you say you are, and you provide a legitimate SIN number not starting with a 0 or 9,
That isn't the criteria: http://www.cra-arc.gc.ca/tx/ndvdls/tpcs ... l-eng.html

Residents of Canada who aren't permanent residents can open a TFSA provided that they meet the other criteria. Whether it's a good idea is a different question.
superfresh89 wrote: If someone goes to a bank and asks to contribute 100K to a TFSA, sure, a good rep might ask if you're sure, and explain that there may be tax consequences.
Some people can legitimately do that. Say you invested your 5k every year and you chose great stocks that did really well - your TFSA account could have a balance of more than $100k. You then withdraw all the funds from your TFSA and contribute 100k to a TFSA the next calendar year. No tax is payable.

As for the OP, your friend really doesn't have any claim against the bank. As per CRA's rules (see link above), non-residents can open a TFSA, but it probably isn't a good investment strategy:
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.
Your friend should close the TFSA asap, and write a letter to the CRA saying they made a mistake and ask for forgiveness. Sometimes the CRA will waive the 1% penalty.

A bigger danger for your friend is that CRA might say that they are actually a resident of Canada for tax purposes, since your friend has an address and bank/investment accounts here, and then assess them on their worldwide income (which sounds like what CRA is doing).

Showing that you aren't a resident for tax purposes is a bigger question and your friend might want to get professional advice from a tax lawyer or accountant.
[OP]
Jr. Member
Aug 5, 2007
189 posts
23 upvotes
M8Rxmjsik wrote: That isn't the criteria: http://www.cra-arc.gc.ca/tx/ndvdls/tpcs ... l-eng.html

Residents of Canada who aren't permanent residents can open a TFSA provided that they meet the other criteria. Whether it's a good idea is a different question.



Some people can legitimately do that. Say you invested your 5k every year and you chose great stocks that did really well - your TFSA account could have a balance of more than $100k. You then withdraw all the funds from your TFSA and contribute 100k to a TFSA the next calendar year. No tax is payable.

As for the OP, your friend really doesn't have any claim against the bank. As per CRA's rules (see link above), non-residents can open a TFSA, but it probably isn't a good investment strategy:



Your friend should close the TFSA asap, and write a letter to the CRA saying they made a mistake and ask for forgiveness. Sometimes the CRA will waive the 1% penalty.

A bigger danger for your friend is that CRA might say that they are actually a resident of Canada for tax purposes, since your friend has an address and bank/investment accounts here, and then assess them on their worldwide income (which sounds like what CRA is doing).

Showing that you aren't a resident for tax purposes is a bigger question and your friend might want to get professional advice from a tax lawyer or accountant.
I've spoken to an accountant and based on my friends situation, he said he was definitely a non-resident according to CRA, and mentioned that you can get confirmation from the CRA by asking them to rule on the issue.

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