Overview

Not all assets are eligible to reap the tax-sheltered benefits of registered accounts. The Canada Revenue Agency (CRA) requires that registered accounts can only hold qualified investments. This is a fancy way of defining investment assets that won't be taxed in registered accounts.

Qualified investments include:

• Cash
• Mutual Funds*
• Guaranteed investment certificates*
• Bonds*
• Securities that are listed on a designated stock exchange in Canada and the US**
• American Depository Receipts

*We don't currently support these investment types on Wealthsimple.
**U.S.-listed securities may still be subject to non-resident withholding tax.

Non-qualified investments can be subject to tax when acquired within a registered account. This includes previously qualified investments that become non-qualified.

Non-qualified investments

Non-qualified investments are excluded from the tax-sheltered benefits of a registered account. These include:

• Shares of a private organization
• Assets that don't trade on a designated stock exchange
• Assets that trade over-the-counter (OTC)*

* Assets that trade OTC are only considered non-qualified if they're not cross-listed on a designated stock exchange.

We only support assets that trade on seven exchanges, all of which are considered designated stock exchanges.

Circumstances where a qualified investment becomes non-qualified

There may be cases where a previously qualified investment becomes non-qualified. This includes:

• Assets that are delisted from a designated exchange and trade over-the-counter (and aren't cross-listed on a designated exchange)
• Assets that are delisted from a designated exchange and trade on a non-designated exchange
• Assets that are acquired by a private organization

What happens if I hold a non-qualified asset in my registered account?

There can be tax consequences for holding non-qualified investments in your registered account, and you should consider moving the non-qualified asset out of your account.

If we notify you that you hold a non-qualified investment, you have the following options available:

• If the non-qualified investment is tradable, you can:
  • Sell the non-qualified investment, or
  • Transfer the non-qualified investment to a self-directed non-registered account.
• If the non-qualified investment is non-tradable, you can:
  • Transfer the non-qualified investment to a self-directed non-registered account.

In some circumstances, the CRA will refund the tax payable on non-qualified investments in a registered account. To qualify for the refund, you must remove the investment from the account before the end of the calendar year. You can learn more about this process on the CRA's website.

How to transfer non-qualified investments out of a TFSA

You can transfer non-qualified investments from your TFSA to a non-registered account in the Wealthsimple app. Please check that you're using the latest version of the app.

Follow these steps to transfer a non-qualified investment out of a TFSA:

1. Log in to your Wealthsimple app
2. Tap your TFSA
3. Tap the yellow Action required banner at the top of the screen
4. Review the information screen
5. Tap Transfer holdings
6. Select or open a self-directed non-registered account
7. Follow the prompts to complete your transfer
8. You'll see the Action required banner until you transfer all non-qualified investments

Prohibited investments

A prohibited investment is an investment the registered account owner has a close connection to.

You can't hold a prohibited investment in a registered account. You can learn more about what the CRA considers to be a prohibited investment.

Earning business income in a registered account

In some cases, the CRA can consider income earned from trading to be business income, which the CRA can tax. For example, they can tax income earned in a registered account if it appears that you're attempting to earn your living by trading in your account.

The CRA doesn't have a limit on an acceptable number of trades that you can make within a registered account. However, they reserve the right to audit the activities within your account if it appears that you're engaging in inappropriate trading activities.

If you have any questions about this, we recommend speaking to a tax professional.

Frequently asked questions