Canada, this is an tax incentive program to encourage canadians to save
for their retirement, thus lightening the burden on government pension
plans. (CPP, QPP) Every canadian gets RRSP room each year equivalent to a
percentage of their income reported on their tax return, and they can
invest money up to this amount in a registered plan without being taxed on
it. You get a tax credit for the amount of tax paid on the investment, and
it can grow tax free. (Non-RRSP investments are subject to a tax on any
capital gains as they accrue - RRSPs aren't - they are only taxed when withdrawn from the plan in retirement.)
It's only a tax deferral - the final investment amount is
taxed as you withdraw it after you've retired, but it's still advantageous
for most people, because the growth isn't taxed as it accrues, so your investment achieves
a better return, and typically people are in a lower tax bracket when they
retire, so they save taxes there too.
Many things can be registered as
RRSPs: stocks, bonds, mutual funds, t-bills, GICs, real estate.
The only caveat is that at least 75% of an RRSP must be in Canadian
investments, that is, no more than 25% in foreign investments. A monthly
penalty of 1% is assessed on RRSPs that exceed the foreign content limit.
The foreign content limit is due to be raised by another 5% next year, to
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