Some promoters of tax-deferral schemes may promise you that they can make tax-free withdrawals from your RRSPs. Typically, the arrangement involves using your self-directed RRSP to invest in a private company through purchase of shares or indebtedness. The funds injected in the private company are then loaned back to you at low or no interest.
You need to first determine if such an investment qualifies for RRSP. CRA defines prohibited investment in http://www.cra-arc.gc.ca/E/pub/tg/t4040/t4040-e.html. In the nutshell, if you own more than 10% of the shares issued by the private company, the investment will not be qualified. Additionally, the private company must meet the assets test condition in order for its shares to qualify to be held within a RRSP: The vast majority of the company’s assets (generally 90% or more based on fair market value) must be used in an active business carried on primarily in Canada. Failing to satisfy the assets test continuously while the shares are held within the RRSP will result in a significant penalty. The penalty is equal to 50% of the fair market value of the investment at the time it was acquired or it became non-qualified.
Secondly, you need to consider the consequences of loans to shareholders. Generally, loan to a shareholder should be included in the income of the borrower. Some exceptions might apply that need to be considered very carefully; i.e. repayment within one year.
Consequently, if you use your RRSP to invest in a private corporation, it is very likely that the value of the shares will be added to your taxable income.