As a general rule, any corporation formed in Canada is deemed to be resident in Canada for the purposes of the Income Tax Act (“the Act”)[1]. This is true even if the “central management and control” (“CMC”) of that corporation is located outside of Canada. But is the converse true? Certainly not! Unlike our neighbors… Continue Reading
Author Archives: Michael Atlas
EIGHT (8) MYTHS REGARDING BEING NON-RESIDENT FOR CANADIAN TAX PURPOSES
Over the years, I have advised hundreds of people, including many accountants and lawyers, regarding Canadian tax residency issues for individuals. I am frequently amazed at how little they know about this critically important area, and the misconceptions that many of them have. Below are what I have found to be the eight (8) most… Continue Reading
CANADIAN TAX IMPLICATIONS OF DISTRIBUTIONS FROM FOREIGN TRUSTS
A Canadian resident who is a beneficiary of a foreign (i.e. non-resident) trust (which generally will include a foreign estate for this purpose) needs to be aware of the Canadian tax implications of any amount received as a distribution from that trust. The comments below will assume that the relevant trust is not a “deemed… Continue Reading
CANADIAN TAX ISSUES WITH RRSP AND RRIF PAYMENTS TO NON-RESIDENTS
As a general rule, any amounts paid from a Registered Retirement Savings Plan (“RRSP”) or Registered Retirement Income Fund (“RRIF”) to a non-resident of Canada are subject to a 25% tax under Part XIII of the Income Tax Act (“the Act”) However, amounts paid to residents of certain countries with which Canada has a tax… Continue Reading
GOING NON-RESIDENT BEFORE GETTING A “GOLDEN HANDSHAKE” CAN SAVE BIG MONEY IN TAX FOR A CANADIAN!
If a highly paid executive will be getting a substantial severance payment (which, for the purposes of this posting, could include damages for wrongful employment; a negotiated severance payment; or one provided in the employment contract), moving to a sunny tax-haven can cut the tax bite by more than half! With increased tax rates starting… Continue Reading
BE WARY OF PITFALL WHEN DOING POST-MORTEM “PIPELINE” PLANNING FOR ESTATES WITH NON-RESIDENT BENEFICIARIES
The use of post-mortem “pipeline” planning is a popular technique aimed at avoiding double taxation in situations where there is a capital gain recognized on the death of a taxpayer who held a significant interest in the shares of a Canadian private corporation at the time of death. It can also apply in situations where… Continue Reading
FOREIGN ASSETS THAT DON’T REQUIRE T1135 REPORTING
In recent years, Canadian taxpayers and their accountants have been increasingly aware of issues relating to CRA form T1135, which is generally required where taxpayers hold “specified foreign property” (“SFP”) with a total cost base of more than $100,000 at any time in a year. This form and the related requirements have been the subject… Continue Reading
CANADIAN TAX IMPLICATIONS OF INVESTMENT IN OFFSHORE MUTUAL FUNDS
Many Canadian residents invest in mutual funds established outside of Canada. Often, the motivation for such investments has nothing to do with tax issues. Rather, in many cases, such funds offer better yields or more attractive asset mixes than domestic funds. In certain cases, such funds may not be directly distributed to Canadian residents,… Continue Reading
RECENT CRA INTERPRETATION REITERATES CANADIAN TAX TREATMENT OF LIECHTENSTEIN FOUNDATIONS
There are no specific provisions in the Income Tax Act (“the Act”) that deal with foreign foundations. Such entities are commonly formed in such civil law jurisdictions as Luxembourg, Liechtenstein, Panama, Austria and Switzerland. They typically have certain attributes that are like a trust, and others like a corporation-the issue is whether they should be… Continue Reading
CANADIAN TAX ISSUES WHEN TRUSTS DISTRIBUTE “CAPITAL DIVIDENDS” TO NON-RESIDENT BENEFICIARIES
Under subsection 83(2) of the Income Tax Act (“the Act”) a Canadian private corporation (“Canco”) can pay special dividends out of its “capital dividend account” (“CDA”). The CDA of a corporation may be derived from any of the following four sources: The tax-free portion of capital gains The tax-free portion of proceeds from the sale… Continue Reading