Subject: Pre immigration tax
planning
Expert:
[email protected]Date:
Wednesday June 06,
2007
Time: 08:20
PM -0400
QUESTION:
Hello David
I have been granted
permanent residence and will be immigrating to Canada from the UK in mid July
2007.
I am wondering whether there is any point in looking into
establishing a Canadian Immigrant Trust before I arrive in Canada - the theory
sounds good, sheltering income generated outside Canada from Canadian income tax
for the first 5 years as a Canadian resident. However all of the information I
seem to come across appears aimed at high net worth individuals (ie over 1m
canadian dollars). I unfortunately am not in this category. I do
consultancy work in the UK through a limited company, and do have a decent sum
sitting in the UK limited company that I have not yet dividended to myself. My
original thought was to transfer the company into an immigrant trust and then
dividend the money into the immigrant trust. However, I want to use this money
to put toward purchasing a residence in Canada - if the trust pays me money
after I become Canadian resident, am I liable to Canadian income tax on this
because it is counted as income? If this is so, then I might as well dividend
the
money to myself before I leave the UK, pay UK tax on it, and then just
transfer the money over? I cannot seem to find any information on the set up and
administration cost of such a Canadian Immigrant trust.
I also require
some advise on the timing of sale of my UK residence if I decide to sell after
becoming settled in Canada. I am not planning to sell in the UK at present, and
aim to go cheap and cheerful on Canada property for the first few years. I may,
however, after becoming settled, decide to sell in the UK and use the proceeds
to buy a princial Canadian residence. Do I have to pay UK or Canadian capital
gains tax on the property? The UK house will be rented while I am settling in
Canada. Is there any point considering transfering the UK property into a
Canadian Immigrant Trust?
Getting the visa seemed straightforward
compared to looking into tax planning issues.
Thanks for any advice you
may have
---------------------------------------------------------
david
ingram replies:
The Furthest I have biked is 350 miles from Winnipeg to
Regina in 1960, five years before you were born. Your experience, training and
amazing fortitude indicate to me that 'you' should likley beocme the world
expert on Immigrant Trusts.
You have not said where you were moving to in
Canada and the differences from Signal Hill to Victoria are immense as you
know.
If I were you, I would make every effort to buy when you get here
if you are coming to Alberta or BC.
If you are going anywhere else, i
would hold back before buying.
Your house becomes revalued for Canadian
Tax purposes when you enter Canada. From that point, any gains are
potentially taxable but because it was your principal residence, you 'do' have
the right / ability to claim any capital gains to be tax free for the first 4
years 'if' you file an election to claim it as your principal residence under
section 45(2) when you file your first Canadian Income Tax with the UK rent
reported on form T776.
Canada taxes on mind and control. Therefore, your
UK corporation must file a Canadian Tax return in Canda because its mind and
control will be in Canada. However, its value for Canadian tax purposes
will be its worth the day you enter Canada as a PR.
I do not know what is
going to happen in the future. When you were here in 2003, the American
dollar was worth $1.50 Canadian. Today, it is worth about $1.04
Canadian. At the same time, a house in Edmonton, Calcary, Victoria or
Vancovuer has doubled in value. Winnipeg, Regina, Saskatoon and most other
cities in Canda have increased 50%.
I have no guarantee that it will
happen again but i would be inclined to dissolve your UK corporation (less
trouble), pay the tax on the dividends, and bring what is left to Canada and buy
your accomodation. If the property continues to increase in value, you
will be a way better off. If it stays level it does not matter and if it
goes down in value for a while, it still does not matter because it is bound to
increase again.
However, if you do not buy and property goes up $80,000,
you have to earn $130,000 and pay $50,000 in taxes to make it up without paying
any interest.
Barring a nuclear holocaust (Chernobyl ??), Real
estate in Western Canada is not likely to collapse in teh near future, and yes,
I am aware that you feel you are a Chernobyl victim. Can it hit
twice?
The following will give a slight indication of my feeling about
immigrant trusts in general.
Since any money you take out 'is'
taxable in Canada and you will likely need funds out of the trust, you have to
have close to a million in my opinion to make it worthwhile. sorry, I did
not mention PW in the following. It was not on purpose, just did not name
EVERYONE.
Immigrant Trusts, KPMG, Deloitte Touche, ask international
income tax & immigration expert consultant david ingram from North
Vancouver, BC, Canada experts on RRSP RESP IRA 401(K) radio CKBD 600AM 9 AM
Sunday mornings on Fred Snyder's IT's YOUR MONEY
centapede at
lists.centa.com
Wed Aug 10 11:46:49 PDT 2005
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
---------------------------------------------------------------------------
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.
Answers to this and other similar questions can be obtained free on Air
every Sunday morning.
Every Sunday at 9:00 AM on 600AM in Vancouver, I, david ingram am a
permanent guest on Fred Snyder of Dundee Wealth Managers' LIVE talk show
called "ITS YOUR MONEY"
Those outside of the Lower Mainland will be able to listen on the internet
at
www.600AM.com <
http://www.600am.com/>
Call (604) 280-0600 to have your question answered. BC listeners can also
call 1-866-778-0600.
Callers to the show and questioners on this board can also attend the
Thursday Night seminars on finance and making your Canadian Mortgage
Interest deductible.
David Ingram's US/Canada Services
US / Canada / Mexico tax, Immigration and working Visa Specialists
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Home office at:
4466 Prospect Road
North Vancouver, BC, CANADA, V7N 3L7
Cell (604) 657-8451 -
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