Written by Joe Snyder
Wednesday, September 27th, 2017
Q: Can I transfer my RSP or TFSA without tax consequences?
A: Yes, you can!
You can move registered accounts like RSPs and TFSAs from one financial institution to another by completing a transfer form specifically designed for this purpose. This Canada Revenue Agency (CRA) form, called a T2033, ensures the funds remain registered, meaning there are no tax implications. In essence, the T2033 means you're not withdrawing from your account and then re-contributing to another – which would have tax consequences. Instead, the T2033 keeps the transferred funds sheltered from any tax implications.
How It Works
If you're investing with Company A and decide you're going to move some or all of your registered funds to Company B, how do you go about doing this? Here are the steps you'd take:
1. Begin by opening the registered account with Company B.
2. Let Company B know that you want to transfer funds into your new account from an external account of the same account type (e.g. RSP at Company A to RSP at Company B) - Note: the T2033 form itself may even be part of the account opening process, as opposed to something you need to seek out.
3. Complete the T2033 and send it to Company B. Company B will in turn submit that form to Company A. Company A receives the T2033, processes it, and sends the proceeds to Company B.
How Long It Takes
Because of the multiple steps noted above, registered transfers usually take a few weeks. For example, if Company A needs to sell securities you hold in your registered account with them, then that needs to be taken into account as well, since there are trade dates, settlement dates, etc. that add time to the actual processing of the request.
There are almost always fees to transfer registered funds out of a financial institution. The reason why they charge transfer fees is because of the cost of (a) administering registered accounts, and (b) processing the transfer as noted above, which is very manual work and can be time consuming. Any transfer fees associated with processing a T2033 are essentially there to recover these costs. Registered accounts require tax reporting, for example – both to you the client and to the CRA. Contributions, withdrawals, transfers – all of these are reported to the CRA.
Exceptions and Other Things to Keep in Mind
The biggest exception to the above process is in the event the account you're trying to transfer is a pension or a locked-in account. If so, the institution you're transferring it to will likely have a locked-in agreement you'll need to complete. As well, the T2033 form may be replaced with a different transfer form, specifically used for locked-in accounts, called a T2151. The financial institution you're transferring to can help you determine if this applies to your situation.
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