Non-qualified investments in your TFSA
What the CRA counts as a non-qualified investment, how a good investment can become one, and what to do if your TFSA ends up holding it.
Your Tax-Free Savings Account (TFSA) lets investments grow without tax on the gains. But not every investment is allowed inside one. Hold something the Canada Revenue Agency (CRA) calls a non-qualified investment, even by accident, and the penalties can be steep.
What a non-qualified investment is
It's any investment that doesn't meet the CRA's rules for registered plans like TFSAs, RRSPs, and RRIFs. If your TFSA holds one, two taxes apply:
- 01A 50% tax on the investment's fair market value when the TFSA acquired it (or when it stopped qualifying). It can be refunded if you dispose of the investment by the end of the following calendar year.
- 02Tax on the income and gains the investment earns while it's inside the TFSA.
What's allowed, and what isn't
| Generally allowed (qualified) | Not allowed (non-qualified) |
|---|---|
| Cash, in Canadian or foreign currency | Shares of a private corporation, including your own business |
| Mutual funds | Debt owed by you or by people related to you |
| Stocks, bonds, and ETFs listed on a designated stock exchange | Land or real estate held directly (a publicly traded REIT is fine) |
| Guaranteed Investment Certificates (GICs) | Investments not listed on a designated exchange, unless the CRA specifically permits them |
| Certain government and corporate bonds | Precious metals that aren't qualified bullion or held through an ETF |
Prohibited investments
Some investments are prohibited: you're too closely connected to them. Owning 10% or more of a company through your TFSA, for example, can make its shares prohibited. Any income or advantage from a prohibited investment is taxed at 100%.
When a qualified investment stops qualifying
An investment that was qualified when you bought it can lose that status later, because of changes to the issuer or its structure:
- 01A company delists from a designated exchange, or restructures through a merger, acquisition, or share spinoff.
- 02A mutual fund or ETF no longer meets the CRA's requirements.
- 03A bond becomes private, stops trading, or no longer meets the CRA's conditions.
- 04Private company shares no longer meet the CRA's small business corporation criteria.
What to do if it happens
- 01Act quickly. Ask your financial institution to remove or swap out the investment, so further tax stops building up and the 50% tax can be refunded.
- 02File Form RC243, the Tax-Free Savings Account Return, if you have tax to report. It's due by June 30 of the following year.
- 03Ask for relief if it was an honest mistake. The CRA may waive or reduce the tax if you correct the problem promptly.
- 04Prevent it next time. Check with your advisor or broker before adding anything unusual, stick to standard investments like ETFs, public stocks, and GICs, and hold private-company or specialized investments in a non-registered account.
- →Your TFSA only works as intended if it holds CRA-approved investments.
- →Non-qualified investments trigger a 50% tax on their value, plus tax on what they earn; prohibited ones are taxed at 100%.
- →A qualified investment can stop qualifying later, after a delisting or a restructuring.
- →If it happens, get the investment out quickly and file Form RC243 if you need to.
Designated stock exchanges
Securities listed on these exchanges are generally qualified investments (current from June 17, 2025):
| Country | Exchange |
|---|---|
| Canada | Cboe Canada (formerly NEO Exchange) |
| Canada | Canadian Securities Exchange (Canadian National Stock Exchange) |
| Canada | Montreal Exchange |
| Canada | TSX Venture Exchange (Tiers 1 and 2) |
| Canada | Toronto Stock Exchange |
| Australia | Australian Securities Exchange |
| Austria | Vienna Stock Exchange |
| Belgium | Euronext Brussels |
| Bermuda | Bermuda Stock Exchange |
| Brazil | BM&F Bovespa Stock Exchange |
| Czech Republic | Prague Stock Exchange (Prime Market) |
| Denmark | Nasdaq Copenhagen |
| Finland | Nasdaq Helsinki |
| France | Euronext Paris |
| Germany | Frankfurt Stock Exchange |
| Germany | Boerse Stuttgart AG (Stuttgart Stock Exchange) |
| Hong Kong | The Hong Kong Stock Exchange |
| Ireland | Irish Stock Exchange |
| Israel | Tel Aviv Stock Exchange |
| Italy | Borsa Italiana S.p.A. (Milan Stock Exchange) |
| Jamaica | Jamaica Stock Exchange (Senior Market) |
| Japan | Tokyo Stock Exchange |
| Luxembourg | Luxembourg Stock Exchange |
| Mexico | Mexico City Stock Exchange |
| Netherlands | Euronext Amsterdam |
| New Zealand | New Zealand Stock Exchange |
| Norway | Oslo Stock Exchange |
| Poland | Warsaw Stock Exchange (main and parallel markets) |
| Republic of Korea | Korea Exchange (KOSPI and KOSDAQ) |
| Singapore | Singapore Stock Exchange |
| South Africa | Johannesburg Stock Exchange |
| Spain | Bolsa de Madrid (Madrid Stock Exchange) |
| Sweden | Nasdaq Stockholm |
| Switzerland | SIX Swiss Exchange |
| United Kingdom | London Stock Exchange |
| United States | BATS Exchange |
| United States | Nasdaq BX |
| United States | Chicago Board Options Exchange |
| United States | Chicago Board of Trade |
| United States | Chicago Stock Exchange |
| United States | Investors Exchange LLC |
| United States | Nasdaq |
| United States | National Stock Exchange |
| United States | New York Stock Exchange |
| United States | NYSE Arca |
| United States | NYSE American |
This summary is general information only, not investment or tax advice for your situation. Speak with your advisor before acting on it.
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