The Canada Revenue Agency (CRA) is warning Canadians against getting involved in tax schemes where promoters (including some tax representatives and tax preparers) claim that individuals can make withdrawals from their self-directed Registered Retirement Savings Plans (RRSPs) without paying taxes.

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

In this particular instance, promoters promise RRSP owners that they can make tax-free withdrawals from their RRSPs. Typically the arrangement involves using a self-directed RRSP to purchase shares of a private company or an 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.