If a Canadian resident has an existing TFSA and then becomes a non-resident, the funds can remain in the TFSA; however the client cannot make contributions to the TFSA while a non-resident. If a non-resident does make a contribution, the Canada Revenue Agency (CRA) will impose a special tax equal to 1% of the contribution. This tax is imposed on a monthly basis until such time as the individual makes withdrawals equal to that contribution or if earlier, the individual becomes a resident of Canada.
Non-residents cannot accrue contribution room.
If a non-resident has made excess TFSA contributions he/she will be subject to 1% tax per month.
Withdrawals can be made while the plan holder is a non-resident. Any withdrawals made while a plan holder is a non-resident will be added back to the holder's unused TFSA contribution room in the following year, but will only be available when the holder subsequently resumes Canadian residency status.
Non-residents will not be taxed on any earnings in their TFSA or on withdrawals. However, any payments made to a non-resident beneficiary, from a deceased holder's TFSA, is required to be included in the beneficiary's income to the extent where the payment exceeds the value of the TFSA at death. Non-resident tax will be deducted on this excess.