Canada offers a number of very significant tax planning advantages. One of these is the immigration trust.
Generally, a resident of Canada must pay Canadian tax on his/her worldwide income. An exception exists, however, for immigration trusts. A properly constituted and administered immigration trust is not resident in Canada for the first five years of its existence. As such, during this time, it is not subject to Canadian tax on any of its income, including taxable capital gains.
To qualify as an immigration trust, the following conditions must be present:
- All of the trust’s property must be acquired from a non-resident settler (or grantor);
- The trust must not receive any financial assistance from any person resident in Canada at any time;
- A majority of the trustees must not be resident in Canada; and
- The non-resident trustees must actively exercise their responsibilities as trustees.
Once an immigrant creates an immigration trust, then he or she can transfer various foreign assets to the trust. These assets can include cash, real estate, portfolios, and other investments. At the end of the five year tax free period, the trust generally loses its tax-free status and is treated in the same manner as a Canadian resident trust. Depending on the immigrant’s circumstances, however, it may be possible to extend the tax-free status.
In addition to tax savings, immigration trusts can provide other benefits. These include the benefits generally associated with maintaining offshore accounts, and include creditor protection and privacy.
Our Service – Minimizing the Tax You Pay
It is extremely important that a skilled and knowledgeable individual creates the immigration trust, and that a competent person manages the trust. Failure to do so can result in massive tax penalties. However, a wealthy immigrant can save a lot of money through a properly administered immigration trust.
Our firm has experience structuring immigration trusts, and knows which offshore intermediaries to use to administer it.