Defined Contribution plan for new immigrant (RRSP limits)

[lkarthik25]

I am a new immigrant (landed in June 2020) and have been working with a company since Aug. I have been enrolled in the company DC plan starting in September. I realized now that DC contributions will be counted against my RRSP contribution room, but being a new immigrant the room for me is zero this year. Will this be considered overcontribution to RRSP & what penalties might I face regarding this?

The DC plan is mandatory to have as per my contract with the employer.

 

[gurpreet.ts]

DCPP contribution will not account for overcontribution to RRSP. Next year when your RRSP contribution limit is calculated (based on 18% of your current year's income subject to the yearly maximum) then the DCPP contribution for this year will be deducted and the balance will be your real RRSP contribution limit for the year.

 

[lkarthik25]

Thanks for the info, much appreciated
Another question - will my income before becoming a resident be counted for RRSP room calculation next year, provided I report it on my returns?

 

[gurpreet.ts]

Thanks for the info, much appreciated
Another question - will my income before becoming a resident be counted for RRSP room calculation next year, provided I report it on my returns?

No worries, no only Canadian income is used to determine the RSPP contribution limits. DM me in case you have any further questions.

 

[localhost8100]

Hey guys, I had question about RRSP contribution. I came to Canada in End of April 2021. Should I wait until I file my taxes in 2022 to contribute to RRSP or I can open an account immediately and start contributing estimated amount?

 

[YVR123]

Hey guys, I had question about RRSP contribution. I came to Canada in End of April 2021. Should I wait until I file my taxes in 2022 to contribute to RRSP or I can open an account immediately and start contributing estimated amount?

https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/individuals-leaving-entering-canada-non-residents/newcomers-canada-immigrants.html

Registered retirement savings plan contributions

Generally, you cannot deduct contributions you made to a registered retirement savings plan (RRSP) in 2019 if this is the first year that you will be filing a tax return in Canada.

However, if you filed a tax return in Canada for any tax year from 1990 to 2018, you may be able to claim a deduction for RRSP contributions you made in Canada for 2019. The CRA bases the maximum amount you can deduct on certain types of income you earned in earlier years.

You can view your RRSP deduction limit online in My Account or with the MyCRA mobile app.

For more information, go to Line 20800 – RRSP deduction.

The section about if you filed a tax from 1990 to 2018 only applied to returning tax residents.

So simple answer is NO. Try to contribute to TFSA instead for the first tax year. After that you will see your RRSP deduction limit (i.e. contribution limit since no one wants to contribute and not able to deduct from their income) in your first year's tax return NOA, and use it in the year after.

 

[siddhant_naik]

DCPP contribution will not account for overcontribution to RRSP. Next year when your RRSP contribution limit is calculated (based on 18% of your current year's income subject to the yearly maximum) then the DCPP contribution for this year will be deducted and the balance will be your real RRSP contribution limit for the year.

Hi Gurpreet,
I am in a similar situation. I came to Canada in September 2021 and started working in December 2021. My company is providing 6% match in Defined Pension Plan. I enrolled in it in January 2022. Since, I haven't filed taxes yet, is it okay if I put 6% in the DCP ? Since DCP is also an RRSP I am not sure if I have any room in the RRSP since I did not file taxes in Canada for last year. Would this result in exceeding the RRSP limit ?

 

[gurpreet.ts]

Hi Gurpreet,
I am in a similar situation. I came to Canada in September 2021 and started working in December 2021. My company is providing 6% match in Defined Pension Plan. I enrolled in it in January 2022. Since, I haven't filed taxes yet, is it okay if I put 6% in the DCP ? Since DCP is also an RRSP I am not sure if I have any room in the RRSP since I did not file taxes in Canada for last year. Would this result in exceeding the RRSP limit ?

You are fine Siddhant as you started your contributions in 2022. Your pension adjustment will be reflected in your 2022 NOA while calculating your 2023 RRSP contribution room. You just cannot contribute much in your RRSP this year (max 18% of your income in 2021).

 

[hardikarora26]

Hi Gurpreet,
I’ve similar question, I moved to Canada in August 2022 and my employer matches 5% of RRSP contribution so I want to make use of that.
Can I contribute to my rrsp in first year?
I read everyone says that I can’t but CRA website just says that I cannot deduct my contributions, meaning I still can contribute but not deduct. It would be great if you can clarify this.

 

[canuck78]

Hi Gurpreet,
I’ve similar question, I moved to Canada in August 2022 and my employer matches 5% of RRSP contribution so I want to make use of that.
Can I contribute to my rrsp in first year?
I read everyone says that I can’t but CRA website just says that I cannot deduct my contributions, meaning I still can contribute but not deduct. It would be great if you can clarify this.

The issue is the amount of RRSP contribution room you qualify for. You currently don’t qualify yet. You’ll have a small amount in 2023.

 

[hardikarora26]

Thanks! I got it.

Here's a more detailed description for future readers:

In order to contribute to 2022 rrsp one needs to have 2022 contribution room. 2022 contribution room is based on Canadian source earned income before the end of 2021. If you don't have any Canadian source earned income in 2021 you have no 2022 RRSP contribution room.

The 2023 RRSP contribution room will be the lesser of 18% of your 2022 earned income or $29,210. One could contribute up to that limit anytime in 2023. If you want to play it safe, wait for NOA that CRA sends after submitting the 2022 tax return and will list the 2023 RRSP contribution limit.