Offshore Trust – An Ideal Tax Saving Option

By Author: Ken Donaldson
Total Articles: 48
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For several years, Canadians with substantial assets have been transferring their assets offshore in order to avoid the impact of Canadian taxation. In recent times, with high disciplinary and other damages being awarded by the courts against directors and officers of corporations and other professionals, more and more individuals are transferring their assets offshore, in order to achieve a degree of asset protection.

Offshore trusts and offshore corporations are viewed as a means to avoid the high level of Canadian Taxation and protect assets against catastrophic judgments.

Residents of Canada are subject to income tax on their worldwide income. Assets which are transferred by residents to foreign trusts and foreign corporations as passive investments may be deemed to be income of Canadian residents, to the extent that Canadian residents control such foreign trusts or foreign corporations or to the extent that Canadian residents are beneficiaries of such foreign trusts or foreign corporations.

You may benefit from using an offshore trust if you are a Canadian resident and:

• You have assets in ...
... various locations throughout the world;

• You intend to distribute assets to individuals living outside Canada during your lifetime;

• You have recently immigrated to Canada; or

• You intend to leave Canada.

If you are not a Canadian resident, an offshore trust can:

• help you distribute assets to Canadian residents tax effectively, either during your lifetime or through your will; or

• provide significant tax benefits if you plan to immigrate to Canada.

An offshore trust is established under the laws of another country and is administered by a non-Canadian trustee, typically a financial institution. A foreign trust has a settler, a trustee and beneficiaries. If you are the settler of the trust, you will fund the trust either by giving or lending property to it. A trust is separate from you and your beneficiaries, and is governed by the laws of the country in which the trustee is resident.

The trustee becomes the legal owner of the trust property and is required to manage the property as directed in the trust deed. The trustee is also responsible for distributing trust assets to the beneficiaries you have named in the trust deed. The trustee has full decision-making powers over trust assets based on the provisions of the trust deed, and it is essential that you have complete confidence in your choice of trustee. To maximize their effectiveness, offshore trusts are generally established in jurisdictions with little or no income, capital gains, or estate taxes.

About Author:-
Ken Donaldson is a chartered accountant who practices as an independent tax consultant. He also author of Canadian taxation of non-residents, in this article he provides offshore tax tips. For more information you can visit Taxca.com.