AMCHAM Canada, CPA Canada and AICPA urge tax fix for savings plans held cross-border

Monday, March 7, 2016

For Immediate Release

Ottawa, March 7, 2016 – The American Chamber of Commerce in Canada (AmCham Canada), the Chartered Professional Accountants of Canada (CPA Canada), and American Institute of CPAs (AICPA) have called on their governments to work together to help people with cross-border tax-assisted saving plans achieve the fully intended benefit of the incentives. 

Tax-deferred and tax-exempt savings plans use special provisions in the tax law to help Canadians and Americans save for a variety of important goals such as pursing higher education, ensuring there is ongoing care for people or family members with disabilities, or investing for the future, to name a few. But the U.S. and Canada treat similar types of savings plans differently.  This mismatched alignment or treatment brings unexpected – and harsh effects – for many people who’ve had a cross-border move or temporary job assignment.

Tax-assisted plans encourage savings by allowing contributions and/or earnings in the plans to go untaxed or to be taxed later (and often at a lower rate) when they’re withdrawn. But, as Jim Yager, Chair of AmCham Canada’s International Tax Committee explains, “the mismatched Canadian and U.S. tax rules that govern these plans can cause some amounts in the plans to be taxed unexpectedly, or the same amount can be taxed twice – once by each country.  

“Many people are often forced to unwind their plans and forfeit the tax benefit to pay the unexpected bill and avoid the complex tax filings that can ensue,” says Yager. “In extreme cases, this can create even more tax to pay on the liquidated amounts.”

The specific plans affected are:

  • Canadian Registered Education Savings Plans (RESPs) and U.S. 529 plans, which both encourage education savings
  • Canadian Registered Disability Savings Plans (RDSPs) and Achieving a Better Life Experience (ABLE) accounts, which both help build funds for the future needs of people or family members with disabilities
  • Canadian Tax Free Savings Accounts (TFSAs) 
  • U.S. Roth Individual Retirement Arrangements (IRAs) for retirement saving

AmCham Canada, CPA Canada and the AICPA have united to help their governments find solutions because of the high number of people in both countries who are affected. These include Americans living in Canada, Canadians living in the U.S., Americans living in the U.S. who contributed to Canadian plans while living in Canada, and Canadians living in Canada who contributed to a U.S. plan while living in the U.S.

In jointly developed letters, the organizations outline how their governments can change domestic rules and/or the treaty to ensure the plans outlined are recognized, treated equally and allow citizens to use the targeted initiatives as intended. 
Our goal in doing this is to allow the social objectives associated with the tax incentives in Canada and the U.S. to be achieved and to ensure smoother cross-border mobility for both workers and retirees,” says Yager.

About AmCham Canada 

The American Chamber of Commerce in Canada (AmCham Canada) is a private, non-profit, membership organization that promotes the two-way flow of trade, goods, services and investment between Canada and the United States.

AmCham Canada with seven chapters located throughout Canada is committed to promoting trade opportunities, advancing economic growth, and facilitating the mobility of people, goods and services across the longest undefended border in the world. AmCham Canada continually strives to promote and foster a positive climate for commerce, trade and investment between the United States and Canada, as well as positive working environment among the business people and professionals who facilitate and strengthen economic ties between the two countries.

AmCham Canada is affiliated with the United States Chamber of Commerce -- the largest global and international business organization in the world.  With affiliates located in over 112 countries, The U.S. Chamber is recognized around the globe as a business leader for trade and commerce and from the United States. 

For more information, contact:

Jim Yager
Chair, AmCham Canada International Tax Committee
AmCham Canada

Tel:  970-445-0463