Gemma is 41years of age and a Canadian resident. At the start of 2022, her available TFSA contribution room was $6,000.
In February2022, she contributed$5,000 into her TFSA and on September7, 2022,she became a non‑resident. OnJuly12,2023, she contributed an additional$2,500 to her TFSA. By the end of 2023, Gemma was still a non‑resident of Canada, and she had not made any withdrawals from her account.
For 2023, Gemma had to pay a tax on the contribution shemade while she was a non‑resident and she was also subject to tax on the excess TFSA amount in her account.
Gemma’s unused TFSA contribution room at the end of2022 was$1,000 (the TFSA dollar limit of$6,000 less her contribution of$5,000). Gemma was not entitled to the TFSA dollar limit of$6,500 for 2023 since she was a non‑resident throughout that entire year. Gemma’s$2,500 contribution on July12,2023, resulted in an excess TFSA amount in her account at that time of$1,500. This is the amount by which her contribution exceeded her available room.
Gemma’s tax on non‑resident contributions for 2023 was$150 because the full amount of her$2,500 contribution wasmade while she was a non‑resident and it remained in her account until the end of the year. Sincethe tax is equal to 1% per month, the tax on her non‑resident contributions was$150 ($2,500 × 1% × the 6months from July toDecember2023).
Since part of Gemma’s contribution while a non‑resident also created an excess TFSA amount ($1,500, as described above) in her account, she also had to pay the1% tax per month on this amount from July to December2023. Her taxon her excess TFSA amounts was$90($1,500×1%×6months).
For2023, Gemma had to pay a total taxof$240 on her TFSA, made up of$150 in tax on her non‑resident contribution plus$90 in tax on her excess TFSA amount.
Gemma will not accumulate any room in 2023 unless she re‑establishes Canadian residency in that year. She will have to withdraw the entire$2,500 she contributed while she was a non‑resident to avoid an additional tax of 1%per month on the non‑resident contributions aswellas on the$1,500 excess TFSA amount.
This tax, calculated on the full amount of the contribution, will apply for each month that any portion of the amount contributed while a non-resident stays in the TFSA and will continue to apply until whichever of the following happens first:
- the contributions are withdrawn in full from the account and designated as a withdrawal of non-resident contributions
- the individual becomes a resident of Canada
An individual is not subject to the tax of 1% on non-resident contributions for the month in which the full amount of the contribution is withdrawn or, if applicable, the month in which Canadian residency is resumed.
