I moved to Sweden to study in 2021 and I am no longer considered a resident of Canada (to my understanding). However, I have some money to invest. I am not allowed to contribute to my TFSA which leaves me with contributing to an RRSP or an ISK (Swedish tax efficient account). In short, you pay ~0.40% of the total account value in tax per year.
My contract in Sweden ends in 2024, but it is possible that I stay there, move back to Canada or move elsewhere in the world.
My questions: Would it make sense to contribute to an RRSP given that I have no Canadian income to offset? And what would be the consequences of withdrawing in a few years if I end up staying in Sweden? Or would you consider the ISK, or some other alternative?
—Kyle
How being a non-resident of Canada affects your investments
Canadian residents pay tax on worldwide income. When you become a non-resident, Canadian tax treatment changes: non-residents face withholding tax on certain types of Canadian-source income, typically ranging between about 15% and 25%, and they generally only file Canadian returns in specific situations, such as rental income or the sale of Canadian real estate. If you live in another country, you usually report income there under that country’s rules.
The Canada Revenue Agency (CRA) looks at a range of factors to decide residency. As the CRA explains:
“To determine your residency status, all of the relevant facts in your case must be considered, including residential ties with Canada and the length of time, purpose, intent and continuity of the stay while living inside and outside Canada.”
Residential ties are the most important factor. The CRA highlights three primary ties that usually indicate Canadian residency:
- Having a home in Canada;
- Having a spouse or common-law partner in Canada; and
- Having dependents, such as children, in Canada.
If you’re temporarily abroad for study or work but keep those significant ties in Canada, the CRA may still consider you a resident for tax purposes. Conversely, if you’ve established residential ties in another state that has a tax treaty with Canada, you may be treated as a deemed non-resident and taxed under withholding rules instead of on worldwide income in Canada.
The Canada–Sweden tax treaty specifically addresses where you are deemed resident:
“He shall be deemed to be a resident only of the State in which he has a permanent home available to him; if he has a permanent home available to him in both States, he shall be deemed to be a resident only of the State with which his personal and economic relations are closer (centre of vital interests).”
From what you describe—living, studying and working in Sweden with no Canadian home, spouse or dependents—it’s reasonable to conclude you are a non-resident of Canada for tax purposes.
Where and how to invest as a Canadian non-resident
As you noted, non-residents should not make new TFSA contributions. If you do, the CRA imposes a penalty of 1% per month on excess TFSA contributions. You can keep an existing TFSA while non-resident, but that account may be taxed under the rules of your country of residence.
Sweden taxes residents on worldwide income. Registered retirement savings plans (RRSPs) are generally recognized as tax-deferred by many countries, but a TFSA is a uniquely Canadian shelter and may not receive similar tax treatment abroad. That distinction matters when you evaluate whether to contribute while living overseas.
RRSP contributions are allowed while you are a non-resident, but they rarely deliver immediate benefit if you have no Canadian employment income to offset—the main value of RRSPs is the upfront Canadian tax deduction. While contributions would grow tax-deferred in the RRSP, if you expect to remain abroad or aren’t sure where you’ll be in a few years, contributing now may not be optimal.
Given your situation, a practical approach is to prioritize local tax-efficient options in Sweden, such as an ISK, or to use a regular taxable brokerage account. These choices avoid triggering Canadian withholding on contributions and keep your investments aligned with the tax regime you currently live under.
What happens if you withdraw RRSP funds while living abroad
If you withdraw RRSP funds while you are a resident of Sweden, Canadian withholding tax applies. Under the Canada–Sweden tax treaty, withdrawals by a Swedish resident are typically subject to a 25% Canadian withholding tax. In retirement, payments from a registered retirement income fund (RRIF) may qualify for a reduced 15% rate, but that reduced rate usually applies only in long-term retirement contexts.
So if you contribute to an RRSP now without a Canadian income tax benefit and then withdraw a few years later as a Swedish resident, you would not have obtained the intended Canadian tax deduction and you would face significant withholding on the withdrawal—likely a poor outcome.
Considering Sweden’s ISK account
Sweden’s investeringssparkonto (ISK) can be a sensible alternative. An ISK taxes the account based on its value using a standardized income base rather than taxing each dividend, interest payment or capital gain separately. The tax is applied at a flat rate to that calculated standard income. For example, when the standard income rate is 1.25% and the tax rate is 30%, the effective annual tax on the account value is 30% of 1.25%.
Because interest, dividends and capital gains would otherwise face regular Swedish tax, the ISK tends to be attractive so long as your investments can earn returns above the notional standard income base. For someone living and working in Sweden, an ISK offers administrative simplicity and predictable taxation, making it a reasonable, tax-efficient option even if your stay is temporary.
If you later return to Canada, you can resume using RRSP and TFSA contribution room then—when Canadian tax deductions and TFSA benefits will actually be useful to you.
Maintaining Canadian accounts while abroad
You can keep existing RRSP and TFSA accounts as a non-resident. It’s also possible to hold a regular Canadian taxable investment account. Withholding tax rules for Canadian-source investment income for a Swedish resident typically include roughly 10% on interest, 15% on dividends and trust distributions, and no Canadian withholding on capital gains. Any Canadian withholding tax can often be credited against your Swedish tax liability, depending on the details of Swedish tax law.
Note that some Canadian financial institutions restrict new account openings for non-residents, though many will allow you to maintain accounts you already hold. If you’re planning to invest from Sweden, compare the ISK and local options as well as the ability of your Canadian institutions to service your accounts while you’re abroad.
I hope this clarifies the trade-offs, Kyle. In short: avoid new TFSA contributions while non-resident, be cautious about contributing to an RRSP without Canadian income to offset, and seriously consider a Swedish ISK or a regular taxable account while you live in Sweden. If you move back to Canada in the future, you can then use RRSP and TFSA opportunities when they deliver clear tax benefits.
Jason Heath is a fee-only, advice-only Certified Financial Planner (CFP) at Objective Financial Partners Inc. in Toronto. He does not sell any financial products whatsoever.
Read more from Jason Heath:
- U.S. withholding tax in an RRSP for Canadians
- Moving to the U.S.? Here’s what to do with your Canadian investments
- Where do we pay income tax if we retire abroad?
- RESPs and Canadian non-residency