“I would like to know the difference between registered and non-registered investments. »
—Louise Lavallée
When we talk about a registered or non-registered investment, we are referring to the type of account in which the investment is held.
We could see it a bit like a box. Investments (mutual funds, exchange traded funds, stocks, bonds, etc.) can be held in a registered box, or an unregistered box.
An account is said to be registered when it benefits from special tax treatment from governments. Consequently, the entry and exit of funds into this account are registered with Ottawa and Quebec, and must respect certain rules.
“Registered accounts are only available to individuals, while unregistered accounts can be opened by individuals, but also by entities [entreprises, fondations, fiducies, etc.] », Points out Corinne Sauvé-Boulé, financial planner and portfolio manager at Demos family wealth management (Raymond James).
Among the most popular registered accounts is the Registered Retirement Savings Plan (RRSP). All amounts deposited in an RRSP account will be automatically reported to Ottawa and Quebec. You can deposit up to 18% of income earned for the previous tax year, with a contribution limit set at $30,780 for the year 2023. Unused contributions can be carried forward.
The amounts contributed will be subtracted from our income for the current year. Tax will be paid in the year the amounts are disbursed from the account.
Another popular registered account is the Tax-Free Savings Account (TFSA). “We start accumulating TFSA rights from the age of 18 and the annual rights are the same for everyone,” notes Mme Sauvé-Boulé. In 2024, the new rights are $7,000 and the cumulative rights since the arrival of this account in 2009 amount to $95,000! »
The amounts contributed will not be subtracted from our income, but any sums disbursed from the TFSA (contribution plus growth) are not added to our income, and therefore will be invisible to governments. A person who lived solely on their TFSA in retirement would have zero income in the eyes of governments, and would benefit from full old age assistance from Ottawa and Quebec.
Among the eight other types of registered accounts that exist, we find the tax-free savings account for the purchase of a first home (CELIAPP), intended for individuals, and their spouses, who are not currently homeowners and who have not been in the last four years, and also the locked-in RRSP account (CRI), which contains sums from a retirement plan of a former employer, the registered education savings plan ( RESP) without forgetting the registered disability savings plan (RDSP).
Note that apart from certain rare cases, everything that happens within a registered account is non-taxable, notes Marc-André Turcot, financial planner, portfolio manager at Demos family wealth management (Raymond James).
“So it is possible, for example, to receive dividends, interest, and capital gains within a registered account without having to pay tax. It is only upon exit, in the case of an RRSP for example, that the government wants to collect its due. »
Non-registered accounts do not have these tax advantages. If an investment held in a non-registered account generates interest or dividends, it must be declared each year in Quebec and Ottawa.
On the other hand, 50% of capital gains realized are taxable, and simply added to our income in the year the investment is sold. “According to the new rules announced by Ottawa, this inclusion rate for individuals will increase to 66.67% of capital gains exceeding $250,000 realized during a year,” said Mr. Turcot.
A non-registered account is more flexible than a registered account in that there are no limits on the amounts in it.
Corinne Sauvé-Boulé notes that, when starting to invest, it is essential to know the contribution limits in the registered accounts to which we are entitled.
“To do this, it is possible to check your RRSP and TFSA contribution room annually on the CRA website. Then, if all registered accounts are maxed out and we have additional money to invest, we can do it in non-registered accounts,” she says.
Consult our section “Demystifying the economy”