Expat Forum For People Moving Overseas And Living Abroad banner
1 - 4 of 4 Posts

·
Registered
Joined
·
2 Posts
Discussion Starter · #1 ·
Hi All,

I am a Canadian Citizen, moved to Cayman for 3 years and have become "resident" again for tax purposes in Canada. Pension Law in Cayman requires 10% be contributed to pension plan - 5% employer, 5% employee.

I have two pensions in Cayman from two different employment terms and essentially two options for each. I am not leaving the money in Cayman.

Pension 1 (10% was fully covered by employer)
Option 1: Withdraw the cash now (less than $5k therefore no waiting period).
Option 2: Transfer to a retirement plan in Canada.

Pension 2
Option 1: Withdraw the cash refund on January 15, 2015 (2 years after employmnt terminated since > $5k).
Option 2: Transfer to a retirement plan in Canada.

Questions:
- Pension 1, Option 1 is favourable as I get the cash now, but will I be taxed on this amount if I deposit it into a Canadian account? I don't see the authorities ever getting wind of my pension account in Cayman, plus it's a small amount, so if this were the case, I would cash the cheque in Cayman and take the cash for spending. I earn over $100k per year, so nearly half would be gone if taxed.
- Pnesino 2, Option 2 - Will this count as income the same as cashing in option 1? The retirement plan transfer is favourable for Pension 2 as it gives me access to my cash sooner for a home buyer plan, but I would still get taxed on this amount via any annuity upon retirement, so the cash would still be favourable in the long run.

Feel free to direct me to sections of the Income Tax Act, CA by trade but was never a tax guy and this is over my head.

I'll call the CRA on this as well, but just wanted some more insight first so I can direct the call better.

Thanks,
Brad
 

·
Banned
Joined
·
6,189 Posts
You should do Option 2 in both cases, though you are (apparently) allowed to "float" the conversion if you want a tax free loan of up to 11 months or so. (Though I wouldn't do that out of an abundance of caution. I'd get the proceeds in a check then deposit that check in an RRSP directly. I'm assuming no Cayman withholding on the withdrawals.) These rollovers have no impact on your RRSP limits, so that's a nice plus.

See this article for more information.

By the way, normally one doesn't come to a public forum to discuss tax evasion. Tax avoidance, yes, but not tax evasion. I don't recommend the former, even semi-pseudonymously.
 

·
Registered
Joined
·
2 Posts
Discussion Starter · #3 ·
Thanks for your response.

I should probably clarify that I am not seeking "tax evasion" by any means, but this pension is effectively from money that I earned while non-resident in a tax-free jurisdiction, so it doesn't make sense to me that I would have to classify this as "income" for Canadian tax purposes when transferring to a Canadian rrsp. Obviously if those are the rules, then I'll have to live with it.
 

·
Administrator
Joined
·
50,843 Posts
You may want to consult with a Canadian tax adviser on the pension.

A couple years ago I stumbled onto a section in a French tax manual that advised that withdrawals from a US deferred pension plan were considered to be a transfer of capital if contributions were made to the fund while you were resident outside France. Now, of course, I have not seen this same section in more recent versions of the manual, but it seems to be a reasonable stance. However, there is a social security tax treaty between the US and France, and I don't know if such a thing exists between Canada and the Caymans.

But you may want to inquire with someone specifically knowledgeable in Canadian taxation to see what they advise.
Cheers,
Bev
 
1 - 4 of 4 Posts
Top