QUESTION:
Hello
We currently have cash assets held in a GIC in Canada. We
are US citizens in the final stages of being granted
permission for permanent residency in Canada. After we
receive our PPR, we will likely wait about 18 months
before we make our complete move to Canada (We'll land
before then, but then return to US to finish my contract).
We would like to use an alternate investment vehicle than
our currently held GIC. We predict an inflationary marekt
and want to pull money from the GIC to invest in gold
bullion. We would like to take advantage of the tax
shelter that may be available to us when we transit to
Canada.
Would it be better for us (in regards to taxation), if we
bought gold bullion in Canada and held it in a Canadian
bank, or would it be better to buy gold bullion in the US
and bring it across the border when we officially move, or
at a later date via an immigration trust. I'm under the
impression that if we bought gold state-side, held it here
for 5 years, and then brought it into Canada, we would
"reset" the original purchase value of the gold bullion to
whatever its calculated value is at the time of import? I.e.
the gold bullion's value at the time of import to Canada
would be used, not the original value at the time of
purchase? Would this be a true tax-free benefit that could
be realized by the sale, in Canada, of the bullion
immediately after its import? For example
In the US, in 2007, buy bullion assets worth $10,000
in 2012 import the US bullion assets to Canada with a new
appraised valuation of $15,000
in 2012 sell the bullion assets in Canada at the price of
$15,000
Net $5,000 profit (when calculated against original
purchase in 2007)
But net $0(zero) capital gains under Canadian tax law as
the asset was sold for the same value that was assigned to
it at the time of patriation.
In other words, capital gains of an asset (including bullion)
are calculated by comparing the value at the time of
patriation with the value at the time of sale. Capital gains
is NOT calculated by comparing the the value of the asset
at the time of original purchase (in the US) with the value
at the time of sale in Canada.
Is this correct?
Thanks,
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david ingram replies: If the gold goes up in the trust, you would be correct. However, if you had done it five years ago, your $15,000 US of gold would be worth one-third less because of the decline in the US dollar. Most Immigrant trusts have lost money in the last five years if denominated in US dollars.
I tend to stay away from Immigratiojn trusts brcause i have seen several of them broken by the CRA (Canada Revenue Agency) when the CRA decides that the trust was not correct.
Also, since I specialize in US Canada tax situations, Having an immigration trust does not escape much, much, if any tax becasue as a US citizen, you are still taxabl;e in the US on any earnings in the Trust and it must be reported on forms 5471 and TDF 90-22.1.
The following older answer may help you.
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QUESTION: We have just received our permanent residency to move to Canada
from England.I would like to put 90,000 pounds into a guernsey offshore
account.This is because the interest rate is 5.10 percent.When living in
Canada when i send my tax forms in would i have to mention the ineterest i
made on my tax form.Whether i bring the money into Canada or leave it still
in the account. The interest would be equivalent to 10,000 Canadian
dollars.And if i was taxed on this,what would be the percentage.
Thankyou
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david ingram replies:
New Immigrants to Canada are allowed to set up a five year immigrant trust
which allows them to accumulate money within the trust tax free for that
five year period.
However, the Canada Revenue Agency (CRA) has a bad habit of breaking the
trusts. In the last two years I have had two South Africans with $400,000
and $1,000,000 tax bills because the CRA deemed that their immigrant trusts
did not qualify.
I doubt that it is worth your effort for 90,000 pounds as the setting up and
management fees would be equal to the amount of tax you would save.
The tax on $10,000 Canadian split between two spouses will depend upon what
other income they have.
Our marginal tax rates are approximately
25% on amounts under $35,000
30% from $35,000 to $60,000
35% from $60,000 to $100,000
40% from $100,000 to $120,000
44% over $120,000.
Every province and territory (13) has a different local tax rate so there
are likely 60 different figures.
The foregoing is very approximate but is sufficient for you to figure out an
approximate tax on $10,000.
If you are going to deal with the concept of an Immigrant Trust, do NOT deal
with someone you find with an Immigrant Trust website. My suggestion would
be to consult with one of the BIG International Accounting Firms such as
KPMG, Deloitte, etc.
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CEN-TA Cross Border Services - Tax, Visas, Immigration
http://www.centa.com/article.php/20071003002640130