Watch Out for Self-directed RRSP Tax Schemes

Published: 11/01/2019

The Canada Revenue Agency (CRA) is warning Canadians about getting involved in tax schemes where promoters are claiming that individuals can make withdrawals without paying taxes from their self-directed registered retirement savings plan (RRSP). Practitioners might wish to share the following with their clients.

What are self-directed RRSPs?

A self-directed RRSP is one where taxpayers control the assets of their RRSP and make the investment decisions themselves.  

What are tax schemes?

Tax schemes are plans and arrangements that contravene the Income Tax Act. They deceive taxpayers by promising to reduce the taxes they owe. For example, these schemes may promise large deductions or tax-free income.  

How does this scheme work?

Promoters of financial schemes promise RRSP owners that they can make tax-free withdrawals from their RRSPs. Typically, the arrangement involves using an individual's self-directed RRSP to purchase the shares of a private company or interest in mortgages (usually at highly inflated values). The funds used to make the purchase are then loaned back to the owner of the self-directed RRSP at low or no interest.

Consider the following before you withdraw from your self-directed RRSP:

  • Does the promoter’s fee you are paying appear to be more than what is normally paid?
  • Do you understand the service being offered to you and why a fee is being charged?
  • Are you getting the funds back immediately, seemingly tax free?
  • Are you getting the funds back by debit/credit cards, offshore bank accounts or ownership in time-shares or any other type of benefit?
  • Are you promised unrealistic returns based on the current investment rates? Research average returns to see if what you are being promised is reasonable.
  • Are you re-investing the original funds removed from your RRSP in order to get a new RRSP tax deduction receipt?

A “yes” answer to any of the considerations above suggests this could be a scheme. Be wary of ads, word of mouth, or seminars in which any of the above are present.

Actions might have serious consequences

Through increased audits of promoters, improved intelligence gathering, and strengthened communication with taxpayers, the CRA continues to identify and shut down tax schemes. Those who choose to participate in these schemes, as well as those who promote them, face serious consequences, including penalties, court fines and even jail time. When CRA finds out about the scheme, taxpayers will be re-assessed for the amount of the RRSP used in the scheme including interest and penalties.

What can a taxpayer do?

The CRA encourages all Canadians to seek an independent second opinion from a reputable tax professional on important tax matters. Taxpayers can report suspected tax evasions online at or by contacting the Informant Leads Centre line at 1-866-809-6841. Steps will be taken to protect callers’ identity, although information may be provided anonymously.

In addition, the CRA continues to encourage taxpayers to come forward and correct their tax affairs through the Voluntary Disclosures Program (VDP): For more information on tax schemes, please go to

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