ROTH IRA payments to Canadian residents – Tax implications

The changes made to Article 13 of the Canada – United States Tax Convention (treaty) under the fifth protocol included significant changes to the taxation of ROTH IRA distributions to Canadian residents.

Paragraph 3 (b) include ROTH IRAs in its definition of “pensions” for purposes of Article 13 of the treaty.

Under the new protocol ROTH IRA payments to Canadian residents will be exempt from taxation in Canada as long as the ROTH IRA distributions are also tax exempt in the US (if the taxpayer were a resident of the US).

Also note that by electing under paragraph 7 of Article 13 of the treaty tax on ROTH IRA earnings will be deferred. In fact, this is not necessarily a deferral as any amounts of future distributions will not be taxable in Canada to the extent they were related to contributions made to the ROTH IRA while a resident of the US.

For more information on the taxation of your US ROTH IRAs, IRAs, 401k or other retirement accounts contact Phil Hogan at 250-661-9417 or by email at phil@philhogan.com.