Tax Planning for New Immigrants to Canada
Despite recent changes which cancelled the 60 month “immigrant trust” exemption, Canada still offers tax exemptions and incentives for new immigrants. We are very experienced in advising new immigrants on how to take maximum advantage of these. We closely coordinate this tax planning with professional advisers in the immigrant’s country of origin.
With appropriate planning, a tax exemption can be obtained on funds withdrawn from a foreign active business. Also, for persons who remain resident less than 5 years, other exemptions can apply. Lastly, this area has many traps which can create a large and unintended tax bill. All situations need a Canadian tax review.
In handling such cases, we
- review the immigrant’s assets, sources of income, and personal situation to determine the most appropriate tax planning;
- prepare a memorandum indicating the recommended tax planning strategy, along with detailed steps for implementing the plan;
- introduce other professionals in offshore jurisdictions, if necessary, to carry out the tax planning (which may involve creating offshore companies and/or offshore trusts);
- provide a tax opinion concerning the planning that attests to the acceptability of the overall plan for Canadian tax purposes;
- prepare all required Canadian filings, which may include Canadian personal income tax returns and special foreign reporting forms;
- review the client’s overall estate planning objectives to make sure they are appropriate, and assist the client in designing new Canadian Wills;
- assist in ongoing taxation issues, such as ways of receiving remuneration or a foreign inheritance, and
- analyze and develop a plan should the person wish to cease Canadian residence.
Sometimes valuations are required in this type of work. If so, we can supply valuation reports in a format that is acceptable to Canadian tax authorities. We have experience in valuing foreign businesses and can do so where required.
Executives Coming to Canada
Executives coming to Canada find the Canadian tax system confusing and complex, full of reporting forms, deadlines and paperwork. This combined with high tax rates can be challenging at best and demoralizing at worst.
We can assist in a variety of ways.
Prior to coming to Canada, we can do a preliminary assessment of the executive’s tax position. At the same time, we will address tax planning ideas and consider various planning strategies. These may include:
- realizing income before arrival (such as exercising stock options);
- triggering capital gains after arrival, since Canada offers new residents very favourable capital gains tax treatment, and
- designing a tax effective remuneration strategy.
We can also advise on executive compensation and moving reimbursements as well as tax equalization policies. Through our international contacts, we can coordinate tax planning in the executive’s home country and assist with tax filings. We will prepare all required Canadian tax filings, and handle correspondence with the tax authorities. For U.S. persons we can prepare their U.S. tax returns.
Offshore Investment and Trust Structures
Certain offshore strategies can be effective for high net worth individuals. However, to the uninitiated, the offshore world is complex, confusing, and fraught with difficulties. The Canadian tax legislation in the international area is extremely complicated. In addition, it can be difficult to find reliable people in foreign jurisdictions to assist with implementing tax-planning structures.
Our extensive experience in implementing international structures, our contacts through the Society of Trust and Estate Practitioners (STEP), and our other connections uniquely qualify us to implement an international tax plan.
The scope for international tax planning very much depends on individual circumstances. In advising high net worth clients and recent immigrants to Canada, we evaluate the possibility of an international tax-planning arrangement that involves either an offshore company or an offshore trust.