International Tax Planning and Structuring

International Tax Planning

Canadian companies are expanding into international markets at an ever-increasing pace. Once the realm of only the largest multinational corporations, today small and medium-sized companies frequently have international activities. Sometimes, insufficient attention is paid to tax consequences of international expansion and the opportunities for a tax-effective international structure are not pursued.

We can analyze a business structure with international dealings to determine whether it has been arranged in the most advantageous way and assist in restructuring it, if necessary. We also assist with the detailed and meticulous compliance requirements that are necessary for Canadian tax-filing purposes. Finally, we can advise on favourable jurisdictions.

At the same time, we analyze the tax position of the company’s shareholders to determine how an international structure could be of benefit at the personal level.

With working experience in over 40 countries, we are experts in international tax treaty networks. These can be used to minimize taxes (especially withholding taxes) and to make a tax plan more resilient.

Establishing an International Business

The Canadian tax system encourages Canadian businesses to expand internationally. Provided that a bona fide active business is carried on abroad, income from that business can often be earned through a corporation located in a favourable jurisdiction. We are experts in structuring such arrangements, advising on possible locations, and implementing the necessary components. We have experience in setting up companies in numerous jurisdictions around the world.
In assessing an international business arrangement, we

  • work with the client to understand the overall business, how it will operate internationally, and how it will be administered outside Canada;
  • assess the Canadian tax implications of the overall venture, including how to own the foreign company and how to finance it, and advise on the tax consequences of repatriating funds to Canada and of selling the business;
  • advise on appropriate jurisdictions;
  • prepare a detailed and comprehensive memorandum concerning the overall tax plan;
  • assist with implementing the plan by obtaining local tax, legal, and other professional advice in the jurisdiction where the business will be located;
  • make introductions, as appropriate, to professionals in that jurisdiction who can assist in implementing the business plan, administering the entity and finding employees and office space;
  • prepare any required valuations of the business or intangibles (for example, intellectual property); and
  • provide a commentary on transfer-pricing issues.

We also assist in maintaining the tax integrity of the structure and the required Canadian tax filings.

International Families

Certain international tax strategies can be effective for high net worth families, especially if they have non-resident members. 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 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 for an international family.

In advising high net worth clients, the scope for international tax planning very much depends on individual circumstances.

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.

Non-Resident Investment in Canada

Through our international contacts, we are often asked to assist non-residents who wish to invest in Canada. This may take the form of a real estate purchase for investment or development, an equity investment in a Canadian business (private or public) on loans. We can advise on the tax implications of the investment; how to structure it using a corporation, trust, or other entity; and whether and how to make use of Canada’s international tax treaty network.

In these types of assignments, we

  • liaise with the client or the client’s professional representatives to determine the objectives of the investment, how it will be financed, and the necessary background information concerning the client’s overseas operations;
  • present a tax-planning proposal for discussion;
  • assist in implementing the proposal, retain legal counsel (if required) to complete the acquisition, and attend to various legal filings;
  • monitor the ongoing operations of the investment, and advise from time to time as to appropriate tax strategies; and
  • assist in structuring the sale of the investment, if and when required, to minimize the Canadian tax implications.

In handling this kind of assignment, we are pleased to work with the client’s existing professionals or, where required, to call on our international contacts for further assistance.

International Athletes and Entertainers

Athletes and entertainers have unique tax issues that require specialized consideration.

We are very experienced in analyzing the tax affairs of athletes and entertainers who come to Canada to work, perform, or participate in an event. We can sometimes structure creative and effective tax-planning arrangements to substantially reduce Canadian tax. We can also attend to tax filings, including a waiver or reduction in tax withholding, filing tax returns, and claiming tax refunds.

People who work in Canada in support of entertainers (such as directors, producers, camera operators, make-up artists, and so on) are often not taxable in Canada if they are resident in a treaty country. In such cases, we can obtain a full refund of any withholding tax deducted.

Actors involved in Canadian films may elect to pay a flat 23 percent tax on gross receipts and benefits instead of paying regular income tax. This simplifies tax filings and may reduce the overall tax rate.

It may also be possible to reduce Canadian tax by structuring a retirement plan, or carrying on the activity through a foreign corporation.

Tax Planning To Become Non-Resident

Canada is a land of immigrants. While more people arrive than leave, a sizable number do emigrate for personal, financial, retirement, or tax reasons. Some are simply returning to their country of origin.

We can advise on the tax consequences of leaving Canada, recommend the optimal way to tackle various issues such as departure tax and withdrawal of amounts from retirement plans, and determine the tax treatment of such items in the country to which the person is moving. We can also assist with interpreting and using various international tax treaties.

We will prepare a checklist of how to sever ties to Canada to make sure there is a clear break of residency status.

Sometimes a person will consider leaving Canada purely for tax reasons. If specifically requested, we can advise on the feasibility of such a plan and the possible tax benefits. This type of planning requires pinpoint precision and often relies extensively on international tax treaties.

We prepare valuation reports where necessary to support the tax planning or tax returns. In addition we can prepare the tax returns for the year of the move.

Offshore 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), http://www.step.org/ International, Tax Specialist Group (ITSG) http://www.itsgnetwork.com/itsg/index.asp 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.

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.