RRSPs RRIFs and TFSAs -> Tax-free savings accounts (TFSAs) -> Asset transfer transactions
TFSA Asset Transfer (Swap) Transactions
Income Tax Act s. 146.2(1), s. 207.01
Asset transfer transactions, also known as swap transactions, are transactions where property is transferred out of an account, and cash or other property is transferred into the account. These transfers, for instance between a TFSA and another registered account such as an RRSP, are not treated as a withdrawal and recontribution, but as a purchase and sale.
Amendments to the Income Tax Act which became law (Bill C-47) in December 2010 prohibit asset transfer transactions between registered or non-registered accounts and TFSAs. The prohibition would apply to transfers between accounts of the same taxpayer or that of the taxpayer and an individual with whom the taxpayer does not deal at arm's length.
The amendments apply tax at a rate of 100% of the amount of the asset transfer transaction, for transactions occurring after October 16, 2009.
Where the asset transfer transaction has occurred inadvertently after October 16, 2009, the Minister of National Revenue may waive or cancel all or part of the tax payable, if the taxpayer promptly rectifies the situation by restoring each account to its position before the asset transfer occurred.
Note: These rules do not apply to in kind contributions or withdrawals of property to or from a TFSA. An in kind contribution or withdrawal is different from a swap transaction, because nothing is being transferred (swapped) out of or into the TFSA in return for the contribution or withdrawal.
Tax Tip: Swapping investments between a TFSA and other accounts can be costly.
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Revised: October 26, 2023