Leaving Canada? Here’s What to Do with Your FHSA, TFSA, RRSP, and RESP Accounts

When you’re preparing to leave Canada for good—or even for several years—it’s easy to get caught up in the logistics of the move: immigration paperwork, housing, schools, healthcare. But many Canadians overlook a crucial area that can quietly cost them thousands of dollars if mismanaged: registered investment accounts.

If you hold any of the following:

• FHSA (First Home Savings Account)

• TFSA (Tax-Free Savings Account)

• RRSP (Registered Retirement Savings Plan)

• RESP (Registered Education Savings Plan)

…then you need to understand how non-residency changes your ability to contribute, withdraw, and benefit from tax-advantaged growth. This guide will walk you through exactly what to do, account by account, and help you avoid penalties, double taxation, and lost growth potential.

🇨🇦 First Home Savings Account (FHSA)

❌ CLOSE IT BEFORE YOU LEAVE

The FHSA is great if you’re planning to buy your first home in Canada while a resident. But it loses nearly all its value if you become a non-resident.

What Happens When You Leave Canada

• You can’t contribute anymore.

• You can’t make a qualifying home withdrawal.

• You can’t transfer it to an RRSP tax-free.

• And worst of all: Withdrawals become fully taxable as regular income.

What You Should Do

• ✅ Transfer to RRSP before leaving (if you have contribution room).

• ✅ Otherwise, withdraw the funds. Only the investment earnings are taxable if you’re not using the FHSA for a home purchase.

• ❌ Don’t leave it open while you’re abroad. It provides zero benefit, and the tax implications are harsh.

Bottom Line: Collapse or transfer your FHSA before departure.

🇨🇦 Tax-Free Savings Account (TFSA)

✅ KEEP IT OPEN — BUT STOP CONTRIBUTING

Unlike the FHSA, you can keep your TFSA after becoming a non-resident. The account remains tax-free in Canada, and investment growth continues without tax.

But There’s a Catch…

• 🚫 You can’t contribute while a non-resident.

• 🧾 If you do contribute, you’ll face a 1% penalty per month on the amount.

• 🕳️ You don’t earn new TFSA room while non-resident.

• 🌍 And your new country may not recognize the TFSA as tax-free (e.g., the U.S. taxes TFSA earnings as regular income).

What You Should Do

• ✅ Leave your TFSA open to preserve its tax-free growth in Canada.

• ✅ Stop all contributions after your date of departure.

• 💡 If you’re moving to a high-tax country that doesn’t recognize TFSAs, consider:

  • Holding tax-efficient ETFs inside your TFSA.

  • Liquidating the account and reinvesting locally, if tax treatment is unfavorable.

Bottom Line: TFSA still grows tax-free in Canada, but check how your new country treats it.

🇨🇦 Registered Retirement Savings Plan (RRSP)

✅ KEEP IT — LET IT GROW

Your RRSP continues to be tax-sheltered after you leave Canada. You can keep all existing investments inside it.

But Some Things Change

• 🛑 No more contributions unless you have Canadian earned income.

• 🧾 Withdrawals are subject to 25% withholding tax (can be lower under tax treaties).

• 📉 No new contribution room accumulates.

• 🔁 Cannot transfer it to foreign retirement plans like a 401(k) or Roth IRA.

Withdrawal Planning Matters

• 🇨🇦 Canada withholds 25% flat tax on RRSP withdrawals for non-residents.

• 📄 Some tax treaties (e.g., with the U.S.) reduce this to 15%.

• 🌍 Your new country may also tax the withdrawal, unless a treaty prevents double taxation.

RRSP → RRIF Conversion (Age 71+)

• At age 71, you must convert your RRSP into a RRIF (Registered Retirement Income Fund).

• RRIF withdrawals are still subject to non-resident tax, but timing and treaty rules matter.

Strategic Considerations

• ✅ Leave your RRSP open and growing tax-deferred.

• ⏳ Time your withdrawals carefully, especially if you’re retiring abroad.

• 🧮 Explore Section 217 election if you’re making large RRSP withdrawals early in retirement (may reduce tax burden).

Bottom Line: Keep your RRSP intact. Withdraw strategically, using treaty rules if available.

🧒 Registered Education Savings Plan (RESP)

✅ KEEP IT — IF THE CHILD MAY STUDY IN CANADA OR AT AN ELIGIBLE INSTITUTION

RESPs are designed to help fund post-secondary education. They can still be valuable even if you leave Canada — especially if:

• The child (beneficiary) remains in Canada or plans to study at a qualifying foreign institution.

• You’re not planning to collapse the account soon.

What Changes After You Leave

• ❌ You can no longer receive CESG (Canada Education Savings Grant) or other grants.

• ✅ Investment growth continues tax-deferred.

• 🚫 You can’t contribute once you become a non-resident.

Collapsing the RESP? Be Careful

• 🧾 You must repay all grant money to the government.

• 💸 Earnings (AIPs) are taxed at your marginal rate plus an additional 20% penalty unless transferred to an RRSP (if space available).

What You Should Do

• ✅ Keep the RESP open if there’s a chance your child will study at a qualifying school.

• 🛑 Stop contributing once you leave.

• ❌ Don’t collapse the plan unless you’re certain the funds won’t be used for education.

Bottom Line: Keep RESP open if the child might use it. Stop contributing after departure.

🌍 Tax Treaties: Your Safety Net

Canada has tax treaties with dozens of countries, including:

• 🇺🇸 United States

• 🇬🇧 United Kingdom

• 🇦🇺 Australia

• 🇫🇷 France

• 🇩🇪 Germany

• 🇯🇵 Japan

How They Help

• 🔁 Avoid double taxation on RRSP or RRIF withdrawals.

• ⬇️ Reduce withholding tax from 25% to as low as 15%.

• 💳 Allow for foreign tax credits on Canadian income taxed abroad.

U.S.-Specific Notes

• The U.S. generally recognizes RRSPs as tax-deferred, but only if reported correctly.

• Use IRS Form 8891 (now obsolete, but historical filings matter) or ensure proper reporting under current IRS rules.

Pro Tip

Always consult a cross-border tax specialist before your departure. Many of the benefits above depend on how you structure your exit and how you report income in both countries.

📝 Departure Checklist: Final Steps

Before you hop on that plane, make sure your financial transition is clean:

🚦 Quick Summary by Account

🎯 Final Thoughts

Moving abroad comes with enough complexity on its own — don’t let your investment accounts turn into tax traps. With a bit of planning and the right timing, you can preserve the value of your FHSA, TFSA, RRSP, and RESP accounts and avoid costly mistakes.

Want tailored advice? Where you’re moving and whether your family is staying in Canada can change the rules significantly. If you’re heading to the U.S., UK, or Australia, for example, I can dig into the specific treaty terms and help you make a smart plan.

Need Help Managing the Transition? We’ve Got You Covered.

Navigating the tax implications of leaving Canada isn’t easy. Between departure returns, residency status updates, and optimizing your registered accounts, there’s a lot that can go wrong without the right guidance.

That’s where we come in.

At Tax4Less.ca Inc, we specialize in helping Canadians abroad maintain their CRA filing status, avoid penalties, and make the most of their investment accounts—even after they’ve left the country.

Whether you’re:

• Unsure how to handle your RRSP withdrawals

• Planning to transfer RESP funds

• Confused about TFSA tax treatment abroad

• Or simply want to file your departure return correctly

—we’ve got your back.

📲 Contact Us to Get Started:

✅ Book a consultation
📞 Call us: 647‑825‑4243
📧 Email: tax.nehal@gmail.com
💼 Visit: https://www.tax4less.ca

Let us help you leave Canada with confidence—and stay compliant wherever life takes you.