We’ve all heard them: the ‘get rich quick’ legends. An investor gets a ‘hot tip’ on an unknown stock from a complete stranger and parlays it into a mansion on millionaire’s row. A friend-of-a-friend ‘hides’ his investments in an offshore haven that saves him taxes. Legends like these seem too good to be true – because they are. That’s why it pays to be a careful investor; otherwise you could find yourself in a real life nightmare titled SCAM.
If you’ve heard intriguing stories about exotic offshore ‘havens’ that offer ‘incredible’ tax relief to Canadians, listen more carefully because those places don’t exist. Commit your money to one of these ‘tax havens’ and it’s a very good bet you’ll never see it again.
Certainly, there are legitimate offshore tax havens – such as the Bahamas, Barbados and the Cayman Islands – that can be worthwhile for individuals with substantial wealth or those with special opportunities.
Even genuine offshore ventures must be structured properly to effectively shelter assets from tax within Canada. This can include establishing an offshore trust, surrendering control of your money to a local ‘trustee’ who you will likely know nothing about. And even then, you might not escape paying tax in Canada. The Canada Revenue Agency (CRA) requires residents of Canada to report their world-wide income, including income from certain offshore trusts, and the failure to report this income may be considered tax evasion.
Continued next week?
This column is presented as a general source of information only and is not intended as a solicitation to buy or sell investments, nor is it intended to provide professional advice including, without limitation, investment, financial, legal, accounting or tax advice. For more information on this topic or on any other investment or financial matters, please contact your financial advisor.