1. CANADA: INDEPENDENT & ASSISTED RELATIVE CATEGORY
While Canada does not have an instant
citizenship program, it does allow those who have been permanent
residents for three years to acquire a Canadian passport.
Being one of the most treasured travel documents in the
world, the Canadian passport provides visa-free travel to
most countries and allows the holder to take advantage of
the North American Free Trade Agreement to live and work
in the United States. Finally, as a result of the recent
decline in the Canadian dollar, residents can enjoy an excellent
lifestyle, with all the infrastructure of living in the
United States, at only two thirds of the cost.
In looking at Canada as a possible destination, there are
two main considerations; qualifying for permanent residence
and tax planning.
ABILITY TO QUALITY FOR PERMANENT RESIDENCE
There are several paths leading to Permanent Residence in
Canada, the rights, privileges, and obligations of the status
received are the same, no matter which category the application
is made under.
Independent/Assisted Relative
Individuals who fall into this category base their applications
on personal skills and their ability to contribute to the
Canadian economy. Applications are made according to a point
system. The system is designed so that a twenty-eight year
old applicant with five years experience in computer software
design and with employment already arranged would be assigned
more points than a fifty-five year old factory laborer with
no employment arranged. If the applicant has a close relative
that is a Permanent Resident of Canada or a Canadian Citizen
he would be considered an Assisted Relative and would receive
bonus points. The Assisted Relative category includes brothers/sisters,
uncles/aunts, and nephews/nieces.
Once permanent residence is secured, an immigrant then can
apply for naturalized Canadian citizenship after three years
of residence.
Currently GlobalRelocate.com are only
processing the following Occupations
NATIONAL OCCUPATIONAL CLASSIFICATION (NOC)
NOC #0131 - Telecommunication
Carriers Managers
NOC
#0211 - Engineering Managers
NOC
#0213 - Information System and Data Processing
Managers
NOC #2132 - Mechanical Engineers
NOC
#2133 - Electrical and Electronics Engineers
NOC
#2147 - Computer Hardware Engineers
NOC
#2173 - Software Engineers
NOC
#2171 - Computer Systems Analyst
NOC
#2174 - Computer Programmers
All other Independent and assisted relative
Occupations may be processed by alternate means. To obtain
information regarding submitting an application with other
than the above nine classifications send and email to
information@GlobalRel.com
CANADIAN TAX ISSUES DURING AND AFTER
THREE-YEAR NATURALIZATION PERIOD
Tax planning for new Permanent Residents of Canada is often
a critical part of the process. If appropriate steps are
taken, the impact of Canadian taxation can be legally minimized
or effectively eliminated. The two fundamental concepts
basic to Canadian tax planning are as follows:
a) Canada taxes its residents on their worldwide income
using
b) Canadian Income tax rules and rates. Canada does not
tax Canadian Citizens if they are not resident in Canada.
c) Canada taxes non-residents of Canada (including Canadian
Citizens who are not resident in Canada) only on:
i) any employment income earned in Canada;
ii) any business income earned from carrying on a business
in Canada;
iii) capital gains primarily attributable to Canadian real
estate and shares in private Canadian companies; and
iv) certain types of Canadian source investment income such
as interest, rents, dividends and royalties. This is done
by the imposition of a withholding tax at a statutory rate
of twenty-five percent, which may be reduced under applicable
income tax agreements.
A Canadian citizen who departs Canada and becomes a "non-resident"
for tax purposes will no longer be subject to Canadian taxation
other than as described above. Neither the Canadian federal
government nor any of its provincial governments impose
any estate taxes or succession duties on death.
The income tax imposed on Canadian taxpayers is computed
at a personal level. The Income Tax Act (Canada) provides
for all the usual deductions and credits recognized in most
industrial countries. Business losses and carry forwards
are allowed in calculating "taxable income". Once
taxable income has been determined, the "marginal tax
rate" will apply. The tax rates are progressive with
maximum rates varying from province to province. Capital
gains are taxed at only seventy-five percent of full rates
and dividends received from Canadian corporations by individuals
receive favor-able treatment. However, the maximum combined
federal-provincial personal income tax rates generally range
from fifty percent to fifty-eight percent depending on the
province of residence at the end of the calendar year.
The Income Tax Act does allow an immigrant
to shelter non-Canadian source income and capital gain for
a period of up to sixty months after their arrival in Canada.
The sixty-month period commences on January 1 of the calendar
year during which the taxpayer becomes resident in Canada
for tax purposes. Typically, income/capital gain-producing
assets that are situated outside of Canada are transferred
into an "offshore trust". A non-resident financial
institution is used as trustee. All income and capital gains
attributable to such assets that are earned by the trust,
escape Canadian tax during the period that the individual
is a Permanent Resident of Canada and is in the qualification
period of Canadian Citizenship. This "tax holiday"
expires at the end of the sixty-month period. If the trust
continues in place thereafter and the person remains resident
in Canada for tax purposes, the trust itself will become
a resident taxpayer and liable for Canadian taxation on
its worldwide income.
If, however, the Permanent Resident
obtains Canadian Citizenship within the five-year tax holiday
window and then departs Canada after obtaining Canadian
Citizenship, the income and capital gain produced by the
Canadian government will never tax the offshore trust. Those
who choose to remain resident in Canada as Canadian residents
and citizens beyond the five year period, may choose to
reacquire the assets from the offshore trust at that point
for a "stepped up" tax basis. They will then have
a new basis equal to the fair market value of the assets
at the end of the five-year period. The alternative is that
they may wish to explore one of several other strategies
to extend the "tax holiday" period.
In conclusion, Canada is a very attractive destination.
One must be aware that it is a potentially high tax country
where improper or absent tax advice can result in high worldwide
tax liability. As Canadian Immigration officials are neither
qualified nor obligated to provide you with any advice relating
to the structuring of your financial or tax affairs, I recommend
that you receive proper written legal advice. Along with
tax structuring, this advice should also set out your ability
to qualify for residence, and help you set up a strategy
to ensure that you maintain your permanent residence and
qualify for citizenship. If properly done, establishing
residence and domicile in Canada may be a more appropriate
solution for a client who for business or family reasons
cannot live in an island tax haven. It is not just for clean
air, mountains and efficiency that Canada can be called
"The Switzerland of the North".
David S. Lesperance Barrister & Solicitor
©COPYRIGHT 1999-2007
DAVID S. LESPERANCE
