In a June 27, 2017 French Technical Interpretation (2017-0708951E5, Roy, Louise, (613) 670-8904), CRA commented on whether a TFSA could be pledged as security for a loan, and whether one could borrow to contribute to their TFSA.

First, CRA noted that it would be possible to borrow to contribute to one’s TFSA, however any interest on the loan would not be tax deductible. Administrative or other fees would also not be deductible.

the terms of the loan

The TFSA can be used as security if:

1. The terms of the debt are such as to have been accepted by persons dealing at arm’s length with each other.
2. It is reasonable to conclude that none of the main purposes is to allow a person (other than the holder) or a partnership to benefit from the tax exemption the TSFA amount.

Editors’ Comment
Note that the first condition was phrased using unusual French. The English version above is our best attempt at converting to English and simplifying.

Further, in an August 28, 2015 Technical Interpretation (2013-0514261E5, Kravetz, Faye, JD, MBA), previously discussed in VTN 414(10), CRA indicated that Subsection 146.2(4) permits a holder of a TFSA to use their interest in the TFSA as security for a loan without loss of TFSA status. CRA indicated that this does not permit the assets of the TFSA to be used by the TFSA holder as security for a loan or other indebtedness.

Also note that a TFSA itself cannot borrow money. See Technical Interpretation 2013-0486491I7 (October 22, 2015, Doiron, Wayne) for more information on whether a temporary deficit would result in the loss of TFSA status.