What happens to your TFSA when you leave Canada

You can keep your TFSA when you become a Canadian non-resident. What you can't do is add money to it - and here's the part that catches people: when you withdraw, you don't get that contribution room back.

The CRA is clear on this. The day you become a non-resident, your TFSA contribution room stops growing. No new $7,000 annual limit. No room restoration from withdrawals. The account becomes effectively frozen for contributions.

The withdrawal trap

Let's say you leave Canada with $50,000 in your TFSA. You withdraw $10,000 while living abroad. A Canadian resident would get that $10,000 back as contribution room in January. As a non-resident, you don't. You now have $40,000 in the account and $40,000 of total room - forever, until you become a resident again.

This is where people mess up. They think TFSA withdrawals always restore room. They don't if you're not a Canadian resident when you make the withdrawal.

What stays the same

The growth inside your TFSA remains tax-free in Canada. If you have $50,000 that grows to $75,000, you don't owe Canadian tax on that $25,000 gain. The TFSA keeps its tax-free status - it just stops accepting new money.

Your home country's tax rules are a different story. Some countries tax the growth inside your Canadian TFSA. The US does this. So does the UK in some cases. The TFSA is only tax-free under Canadian tax law.

If you move back

When you become a Canadian resident again, your contribution room starts growing immediately. You get the annual limit for that year plus any future years. What you don't get back is the room you lost from non-resident withdrawals.

Using the earlier example: you left with $50,000, withdrew $10,000 as a non-resident, and moved back to Canada in 2027. Your room in 2027 would be $40,000 (what's left) plus $7,000 (the 2027 limit) plus whatever annual limits you accumulate going forward. That $10,000 you withdrew while abroad is gone forever.

The contribution penalty

Here's the expensive mistake: contributing to your TFSA while you're a non-resident. The CRA treats this as an over-contribution and charges 1% per month on the excess amount. Contribute $5,000 as a non-resident and you'll pay $50 every month until you withdraw it.

Some non-residents don't realize they've lost their contribution room and keep making their regular monthly deposits. The penalties add up quickly. At TaxSplit.ca you can check your contribution limits, but remember - those limits freeze when you leave Canada.

The paperwork side

You don't need to close your TFSA or notify the CRA when you become a non-resident. The account stays open. Your financial institution might have different rules - some require non-residents to close certain accounts - but that's between you and them, not a CRA requirement.

Keep your records. If the CRA ever questions your contribution room calculations, you'll need to prove when you left Canada and what your balance was at that time.

When it makes sense to keep it

If you're planning to return to Canada eventually, keeping the TFSA usually makes sense. The tax-free growth continues, and you preserve whatever contribution room you have left. If you're never coming back and your new country taxes the TFSA growth anyway, closing it might be simpler.

The key insight: your TFSA doesn't disappear when you leave Canada, but it stops being the flexible account you're used to. Plan accordingly.