Author Topic: RESP - moving abroad  (Read 1918 times)

daverobev

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RESP - moving abroad
« on: August 27, 2018, 12:47:33 PM »
Can someone ELI5 RESPs when moving overseas?

I'm the subscriber, and there are two accounts, one with ~$15k, one with ~$5k. I'm going to guess that we contributed 2/3 of the amount, with the rest being CESG and growth.

The first issue is that I don't I should hold ETFs because they are not 'UK Reporting' (there basically aren't any Canadian ETFs which are), which means any gains and dividends will be treated as regular income; and I don't know what kind of 'trust' it would fall under in British law, ie would they be taxed in my hands - probably.

So. My thinking is that, to reduce complexity, just close the accounts. I believe if the children are not Canadian resident prior to starting university (even if they were to go to a Canadian university!) the CESG would have to be paid back. Instead I'll take whatever remains of the money and put it into a Junior ISA (which is like a TFSA) and Junior SIPP (like an RRSP). I'll be opening those accounts anyway, so - no hassle there.

Now, my main concern is how punitive will the closing of the RESPs be? I know the contributions are all tax free, and the CESG has to be repaid in full. The rest - the growth - is added to my income with an extra 20% tax? Is that right?

So just for example - $10k contrib by me, $2k CESG, $3k growth; $10k is mine, $2k back to the government, $3k taxed as income at my marginal rate + 20%, so let's say 40%. So I get back $1800 of the $3k? Does that sound right?

What happens if I wait until I'm not resident (say I become NR next year, wait til 2020 to collapse the RESP) - and have no Canadian taxable income (other than this RESP collapse) - do I have to file a 2020 tax return, or...?

I'm basically looking for the cleanest and most efficient way to get out of this so I haven't wasted my children's money over the last few years.

I guess I can claim the 40% tax paid to the CRA against my UK return? Or... is the 'normal income tax' and 'penalty tax' treated differently?

daverobev

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Re: RESP - moving abroad
« Reply #1 on: September 21, 2018, 12:02:42 PM »
To update/bump, I think I can't get the growth out. I think. Because we're not eligible for AIP, and the only alternative is to give the money away to a post-secondary institution of our choice. Um. No thanks.

So the plan seems to be:

Withdraw all contributions, government gets back all grants. Leave growth alone (invest in probably Royal Bank, Telus, and Suncor as I can't hold any bloody ETFs as none are UK reporting) until the child goes to uni. Get EAP then, even though non-resident, and pay probably 25% withholding as it comes out to Canada. I'll pay tax on the dividends along the way to the UK.

 

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