Invest in NISA or wait to invest in TFSA in Canada

[Kaard]

Hello all,

I'm new to all this, but my wife and I have been recently attempting to get our fiances sorted. We have 2 kids, a 3rd on the way and figure its past time we plan something for the future.

I've done some reading, and basically my intent is to invest in a vanguard index fund, and keep it in a Canadian Tax Free Savings Account (TFSA).
I'm not looking to stock pick or time the market or anything else, I simply want to invest and let it compound and add what income I can each year.

Our income is not that high at the moment with my wife on maternity leave, BUT we have 1million yet sitting in a bank account accumulating nothing, and have for awhile now. We also have no debt.

My big question is this:
If we plan to move to Canada in a few years time, is it worth me opening a NISA and invest here in Japan for only a few years, then withdrawing/transferring to a new TFSA in Canada?

Ideally I'd rather move the money to Canada and just invest from there, but I am not currently a resident, despite being a citizen, since I've been in japan for 10 years. At least I don't think I'm a resident. I do have bank account there, and until a few years ago was sending money to pay off student debt, but I believe residency in this case is determined by paying taxes.

OR, should I have a family member, my mother, open the account in her name, with the money we send, and after we move, transfer it to me then?

If anyone reads all that and takes the time to respond, thank you in advance.

[adamu]

Some thoughts:

1. In the short term, your investment could devalue. So if you open a NISA, you could find yourself having to close down the account and withdraw less than you would have had if you left it in a bank account. If you're not happy with that idea, investing it is probably not a good idea.
2. However, technically you would be then re-investing it back in Canada, and re-buying at a similar price to what you sold at, so although it's not psychologically great, it's not a permanent loss.
3. If you get someone else to invest on your behalf, you could get into complicated taxation situations. Especially if gift or inheritance taxes end up getting involved. Opening an account on behalf of somebody else may also raise the eyebrows of the money laundering department...
4. You will have to close down the NISA when you move, and re-invest in the TFSA. I don't know how TFSA works, but if it has an annual deposit cap, then you could be losing out on locking in funds by keeping it in Japan.
5. If you end up staying in Japan longer than expected, you might wish you had opened the NISA if you decided not to before.
6. Income on foreign investments is taxable in Japan, and Japan doesn't recognise foreign tax-protected accounts, so if you stay in Japan (and declare your income properly), you will only get tax benefits with the NISA, not the TFSA.

Sorry I don't know which is best for your situation, but there are a few points to consider.

[RetireJapan]

If you are definitely going to leave Japan in the next few years, I would be inclined to see if you can invest in Canada first, and if not maybe keep the money in cash and take it with you when you leave.

If there is a chance you will stay here you might want to look at investing in NISA, as you can take the money out whenever you like (should you decide to leave) but you'll at least have started investing if not.

I would be very careful about having other people open accounts with your money as this could get you or them in trouble if it is seen as fraudulent.

Anyone else?

[goodandbadjapan]

Everything Ben and Adamu said, especially opening accounts in someone else's name. It could lead to all sorts of problems.

[Kaard]

Thank you for the advice,
I shall take all that under consideration.

Has anyone out there actually gone through the Process?

I definitely feel like Canada is the safer/better place to invest.
The TFSA is actually pretty decent, there is no limit to how long you can keep money/shares. Any gains made by the investments in a account stay tax free and don’t contribute to the yearly contribution cap.
If you don’t max out your cap it carries over to the next year.
That is true even if you Open one today, the contribution cap is set from when the account system started, so the current cumulative amounts is upwards of $65,000.
After that it’s some where between $5000-10000 a year, as it
Changes yearly.

Compared to the NISA it seems much better, but I just can’t open one unless I’m a resident.... which I haven’t been for about 9 years.

[klistwan]

I believe you're still able to open one as a non-resident one, but you won't be able to contribute to it. This is straight from the Canadian Revenue Agency guidelines online:

A person determined to be a non-resident of Canada for income tax purposes can hold a valid SIN and be allowed to open a TFSA, however, any contributions made while a non-resident will be subject to a 1% tax for each month the contribution stays in the account.

[kansaifolk]

Hello Kaard,
Fellow Canadian here. As you said, we cannot open a TFSA account as non-residents. While here in Japan, to invest in Canada, I opened a non-registered account (basically just a trading account) as a non-resident with RBC Direct Investing. They automatically withhold 25% foreign resident tax on all dividends earned (they do all the work - easy), and any capital gains are supposed to be reported by me to Japan and taxes paid here (but if you don't sell, you don't earn capital gains, and then you don't have to report).
If a family member is not using their TFSA and willing to let you use it/manage it, I would count yourself lucky ( they may not like it though - you would likely have access to all their banking details, etc., since it is connected to their checking account and/or money has to go through their accounts). I was hoping to do this, but all my family members are using their TFSAs to the max.
I also have a NISA here and add a bit here and there, but I never seem to do well here in investing, so that has kind of tapered off.

[Sybil]

If a family member is not using their TFSA and willing to let you use it/manage it, I would count yourself lucky ( they may not like it though - you would likely have access to all their banking details, etc., since it is connected to their checking account and/or money has to go through their accounts). I was hoping to do this, but all my family members are using their TFSAs to the max.

Not a good idea. You could create all kinds of problems for yourself.