Immigration Trust: A five year tax holiday for new Canadian immigrants

[rocky272727]

Source: http://www.cicnews.com/2010/02/immigration-trust-year-tax-holiday-canadian-immigrants-02764.html

Canada’s Income Tax Act allows new immigrants to Canada to benefit from a five year ‘tax holiday’ upon their arrival, which is particularly beneficial to individuals moving to Canada who have a high net worth and retain assets outside of Canada.

Newcomers to Canada are normally subject to Canadian income taxes on their worldwide income upon their arrival. However, certain provisions in the Act allow for the creation of what is known as an “immigration trust.” This trust holds the newcomer’s foreign investment assets. If properly-structured, any foreign earned income and capital gains earned from the assets held in this trust are exempt from taxation.

It is possible for immigrants to set up an immigration trust and to transfer their foreign assets to that trust before arriving in Canada. As an example, take an individual who plans to reside in Canada and who owns property that generates rental income in his or her country of origin. This individual can then establish an offshore Immigration Trust and transfer the property to that trust. The income earned from the rental of this property will not be taxable by Canadian authorities for a period of sixty months, or five years, from the date the individual becomes a resident of Canada.

Because of this five-year tax holiday, it is possible for an immigrant to acquire Canadian citizenship in just three years, and then choose to become a non-resident for Canadian tax purposes. In this manner, it is possible for foreign earned income and capital gains to never at any point fall into the Canadian tax net.

May help some people

 

[qorax]

That was a nice read Rocky. Wonderful... Thankx !
We'll have to figure-out how to go about it... any experts who can further advice?

 

[hmisabpk]

It is very good news for new immigrant. Happy to hear that.
Is this going to implement in this year ? Or Implemented are ready?
Any comments ? How about those are having little net worth ? Are they are going to get any benefit from a five year ‘tax holiday'
Hope for good !!!!!!! 8)

 

[explorer101]

In any case, I dont think that income earned outside canada by the immigrants can be taxed in Canada or any other country.

 

[binny8]

very useful information.
what happens to this trust after attaining canadian citizenship...

 

[PMM]

Hi

In any case, I dont think that income earned outside canada by the immigrants can be taxed in Canada or any other country.

Wrong, PRs who are Canadian residents for tax purposes are taxed on their world wide income.

PMM

 

[explorer101]

Hi

Wrong, PRs who are Canadian residents for tax purposes are taxed on their world wide income.

PMM

When you arrive in Canada as a new PR and bring money which one had earned in some other country - i am sure that will not be taxed in Canada. The income earned on that money in Canada can be taxed but not the original amount.

 

[PMM]

Hi

When you arrive in Canada as a new PR and bring money which one had earned in some other country - i am sure that will not be taxed in Canada. The income earned on that money in Canada can be taxed but not the original amount.

That is true, but that is not what you said in your original post "In any case, I dont think that income earned outside canada by the immigrants can be taxed in Canada or any other country. "

PMM

 

[eemmoo]

Source: http://www.cicnews.com/2010/02/immigration-trust-year-tax-holiday-canadian-immigrants-02764.html

Canada's Income Tax Act allows new immigrants to Canada to benefit from a five year ‘tax holiday' upon their arrival, which is particularly beneficial to individuals moving to Canada who have a high net worth and retain assets outside of Canada.

Newcomers to Canada are normally subject to Canadian income taxes on their worldwide income upon their arrival. However, certain provisions in the Act allow for the creation of what is known as an “immigration trust.” This trust holds the newcomer's foreign investment assets. If properly-structured, any foreign earned income and capital gains earned from the assets held in this trust are exempt from taxation.

It is possible for immigrants to set up an immigration trust and to transfer their foreign assets to that trust before arriving in Canada. As an example, take an individual who plans to reside in Canada and who owns property that generates rental income in his or her country of origin. This individual can then establish an offshore Immigration Trust and transfer the property to that trust. The income earned from the rental of this property will not be taxable by Canadian authorities for a period of sixty months, or five years, from the date the individual becomes a resident of Canada.

Because of this five-year tax holiday, it is possible for an immigrant to acquire Canadian citizenship in just three years, and then choose to become a non-resident for Canadian tax purposes. In this manner, it is possible for foreign earned income and capital gains to never at any point fall into the Canadian tax net.

May help some people

Good information

 

[binny8]

Has anyone opted for this immigration trust yet...

I have rental income in India- should i declare it to customs.

- will it be taxable in Canada, if i dont setup this fund?
- will taxes be changed on international income after my status changes from PR to Resident of Canada.
- or is it advisable not to declare it at all in Canada.
- also wanted to know weather I will have to change my savings account in Indian bank to NRI/NRO account?

 

[prsh_patel]

tats nice info Rocky....thanks...

 

[rocky272727]

Thought of sharing this article with everyone, though its old

Non-residents relocating to Canada can enjoy tax savings and other benefits for up to five years - Gena Katz
MID-OCTOBER 2004

(The extract has been taken from advisors.ca newsletter, written by Gena Katz)

On becoming a resident of Canada, an individual's world income is automatically subjected to Canadian tax. There is a specific exception, however, when an immigration trust is used to hold foreign investment assets. An immigration trust set up prior to establishing residence in Canada will not be taxable in Canada for the first five years of Canadian residency. These trusts can provide significant benefits to non-resident executives who are relocating to Canada, and to other immigrants. Within the past few years, significant tax changes have been proposed in relation to foreign investment entities, including non-resident trusts. However, the protected status enjoyed by immigration trusts has survived, offering new residents to Canada a significant tax-savings opportunity in their transition to Canadian tax
residency. An immigration trust is simply a non-resident trust, established in a foreign tax jurisdiction, that holds foreign investment assets. As a trust, it is an arrangement among three parties:
• The settlor (generally a non-Canadian resident, relative or friend) who creates the trust by making the initial contribution;
• The trustee (generally a non-Canadian resident or an offshore trust company) who manages the property for the benefit of the ultimate
recipients; and
• The beneficiaries (the immigrating individual and his or her family) who are the ultimate recipients.

In order to be a non-resident trust, the majority of the trustees must be non-residents of Canada. An offshore trust company is often used to act as trustee for immigration trusts. Once the trust is established, the immigrating individual can transfer various foreign assets to the trust, including an investment portfolio or real estate. During the first five years of the immigrant's Canadian residency, income and capital gains can accumulate tax-free in the trust. At the end of this period, if the trust is still in existence, it loses its tax-free status
and is treated in the same manner as a Canadian resident trust. An immigration trust can be established prior to the individual becoming
a resident of Canada or at any time within the first 60 months of Canadian residency. However, because the 60- month tax-free period commences at the time Canadian residency is established, the tax-free accumulation of income and capital gains in the trust is maximized when the trust is set up prior to becoming a resident of Canada. Although an immigration trust enjoys a period of tax-free status in Canada, the tax regime in the trust's country of residence must be considered. Generally, immigration trusts are established in jurisdictions that typically do not impose taxes on income or capital gains earned by the trust. In addition, political stability and accessibility of the jurisdiction are important factors to consider. The tax-free income and capital gains earned from assets in the trust
are added to the trust capital at the end of the year and may be distributed, together with the original capital, to Canadian beneficiaries in subsequent years, without attracting any Canadian income tax. This can result in substantial investment capital growth over the five-year period. For example, if $1 million earns 7% annually in an immigration trust, the capital accumulated after five years will be approximately $1.4 million. Compare this with the same investment that is taxed annually in Canada at a rate of 45%, which will only grow
to approximately $1.2 million after five years. In addition to the tax savings, immigration trusts can provide other benefits, including creditor protection for trust assets, reduction of taxes and probate fees on death, and privacy and confidentiality of personal financial
information.

 

[Indiapnp]

Thought of sharing this article with everyone, though its old

Non-residents relocating to Canada can enjoy tax savings and other benefits for up to five years - Gena Katz
MID-OCTOBER 2004

(The extract has been taken from advisors.ca newsletter, written by Gena Katz)

On becoming a resident of Canada, an individual's world income is automatically subjected to Canadian tax. There is a specific exception, however, when an immigration trust is used to hold foreign investment assets. An immigration trust set up prior to establishing residence in Canada will not be taxable in Canada for the first five years of Canadian residency. These trusts can provide significant benefits to non-resident executives who are relocating to Canada, and to other immigrants. Within the past few years, significant tax changes have been proposed in relation to foreign investment entities, including non-resident trusts. However, the protected status enjoyed by immigration trusts has survived, offering new residents to Canada a significant tax-savings opportunity in their transition to Canadian tax
residency. An immigration trust is simply a non-resident trust, established in a foreign tax jurisdiction, that holds foreign investment assets. As a trust, it is an arrangement among three parties:
• The settlor (generally a non-Canadian resident, relative or friend) who creates the trust by making the initial contribution;
• The trustee (generally a non-Canadian resident or an offshore trust company) who manages the property for the benefit of the ultimate
recipients; and
• The beneficiaries (the immigrating individual and his or her family) who are the ultimate recipients.

In order to be a non-resident trust, the majority of the trustees must be non-residents of Canada. An offshore trust company is often used to act as trustee for immigration trusts. Once the trust is established, the immigrating individual can transfer various foreign assets to the trust, including an investment portfolio or real estate. During the first five years of the immigrant's Canadian residency, income and capital gains can accumulate tax-free in the trust. At the end of this period, if the trust is still in existence, it loses its tax-free status
and is treated in the same manner as a Canadian resident trust. An immigration trust can be established prior to the individual becoming
a resident of Canada or at any time within the first 60 months of Canadian residency. However, because the 60- month tax-free period commences at the time Canadian residency is established, the tax-free accumulation of income and capital gains in the trust is maximized when the trust is set up prior to becoming a resident of Canada. Although an immigration trust enjoys a period of tax-free status in Canada, the tax regime in the trust's country of residence must be considered. Generally, immigration trusts are established in jurisdictions that typically do not impose taxes on income or capital gains earned by the trust. In addition, political stability and accessibility of the jurisdiction are important factors to consider. The tax-free income and capital gains earned from assets in the trust
are added to the trust capital at the end of the year and may be distributed, together with the original capital, to Canadian beneficiaries in subsequent years, without attracting any Canadian income tax. This can result in substantial investment capital growth over the five-year period. For example, if $1 million earns 7% annually in an immigration trust, the capital accumulated after five years will be approximately $1.4 million. Compare this with the same investment that is taxed annually in Canada at a rate of 45%, which will only grow
to approximately $1.2 million after five years. In addition to the tax savings, immigration trusts can provide other benefits, including creditor protection for trust assets, reduction of taxes and probate fees on death, and privacy and confidentiality of personal financial
information.

is this still active?

 

[Indiapnp]

Thought of sharing this article with everyone, though its old

Non-residents relocating to Canada can enjoy tax savings and other benefits for up to five years - Gena Katz
MID-OCTOBER 2004

(The extract has been taken from advisors.ca newsletter, written by Gena Katz)

On becoming a resident of Canada, an individual's world income is automatically subjected to Canadian tax. There is a specific exception, however, when an immigration trust is used to hold foreign investment assets. An immigration trust set up prior to establishing residence in Canada will not be taxable in Canada for the first five years of Canadian residency. These trusts can provide significant benefits to non-resident executives who are relocating to Canada, and to other immigrants. Within the past few years, significant tax changes have been proposed in relation to foreign investment entities, including non-resident trusts. However, the protected status enjoyed by immigration trusts has survived, offering new residents to Canada a significant tax-savings opportunity in their transition to Canadian tax
residency. An immigration trust is simply a non-resident trust, established in a foreign tax jurisdiction, that holds foreign investment assets. As a trust, it is an arrangement among three parties:
• The settlor (generally a non-Canadian resident, relative or friend) who creates the trust by making the initial contribution;
• The trustee (generally a non-Canadian resident or an offshore trust company) who manages the property for the benefit of the ultimate
recipients; and
• The beneficiaries (the immigrating individual and his or her family) who are the ultimate recipients.

In order to be a non-resident trust, the majority of the trustees must be non-residents of Canada. An offshore trust company is often used to act as trustee for immigration trusts. Once the trust is established, the immigrating individual can transfer various foreign assets to the trust, including an investment portfolio or real estate. During the first five years of the immigrant's Canadian residency, income and capital gains can accumulate tax-free in the trust. At the end of this period, if the trust is still in existence, it loses its tax-free status
and is treated in the same manner as a Canadian resident trust. An immigration trust can be established prior to the individual becoming
a resident of Canada or at any time within the first 60 months of Canadian residency. However, because the 60- month tax-free period commences at the time Canadian residency is established, the tax-free accumulation of income and capital gains in the trust is maximized when the trust is set up prior to becoming a resident of Canada. Although an immigration trust enjoys a period of tax-free status in Canada, the tax regime in the trust's country of residence must be considered. Generally, immigration trusts are established in jurisdictions that typically do not impose taxes on income or capital gains earned by the trust. In addition, political stability and accessibility of the jurisdiction are important factors to consider. The tax-free income and capital gains earned from assets in the trust
are added to the trust capital at the end of the year and may be distributed, together with the original capital, to Canadian beneficiaries in subsequent years, without attracting any Canadian income tax. This can result in substantial investment capital growth over the five-year period. For example, if $1 million earns 7% annually in an immigration trust, the capital accumulated after five years will be approximately $1.4 million. Compare this with the same investment that is taxed annually in Canada at a rate of 45%, which will only grow
to approximately $1.2 million after five years. In addition to the tax savings, immigration trusts can provide other benefits, including creditor protection for trust assets, reduction of taxes and probate fees on death, and privacy and confidentiality of personal financial
information.

is this still active?