I have made extensive researches lately in an attempt to find a legal way to reduce my tax burden as a Canadian-controlled private corporation (CCPC).
Situation :
1) Incorporated federally.
2) No office or employee or tangible property in Canada. Single shareholder (the director) who performs work from home for worldwide customers (foreign income). The company owns equipment (valued at $200,000+) located in the United States (not constituting a Nexus), cash and shares of publicly traded companies.
3) Currently pays 80,000+$ corporate income tax + personal income tax.
The best plan I have found so far is :
1) Continuance of the corporation offshore. Opening of an offshore bank account. All options other than continuance will trigger taxes on the disposition of assets to the offshore company.
2) Director (mind and management) must relocate in the same jurisdiction. Residency must be obtained, usually by staying at least 180 or 182 (non-consecutive) days.
3) Payment processor can remain Paypal, but payout can only be made to a US bank account. It should be possible as a Canadian citizen to register a US bank account (e.g. perhaps through RBC).
My questions are :
1) The process of continuation is as follows : the offshore corporation is created, a Letter of Satisfaction is obtained and forwarded to the offshore authorities and a Certificate of Continuance is obtained :
https://www.ic.gc.ca/eic/site/cd-dgc.nsf/eng/cs01052.html
1.1) A departure tax is applicable. What properties exactly are taxed? I believe that equipment and intellectual property actively used by the business is not taxed, is that correct? So, in our case, the departure tax is only applicable to the shares of publicly traded companies?
1.2) What could go wrong / how could this process be refused by the Canadian or offshore authorities (e.g. by application of a GAAR rule)?
2) What jurisdiction is most favourable? I find Barbados to be most interesting. Because of its tax treaty with Canada, I expect less friction when eventually repatriating money in Canada. Furthermore, the treaty clearly defines that a corporation is resident where it is national (hence the continuance) and an individual is resident where a permanent residence is established. It appears to be a relatively easy jurisdiction to become resident (i.e. one can possibly stay in Barbados for 180 days without a Visa, leave few days and come back and). Corporate income tax in Barbados is very low (1-5.5%). There is a 12.5% dividends witholding tax, however more careful planning can be done. There is no witholding tax paid on income from foreign source (all our income is from outside Barbados) to non-resident, so leaving the island to pay dividends as a lump sum payment can be done.
I'm very excited by the prospect of lowering my tax burden legally, but this all sounds too good to be true.
Anything else I should know?
Thank you !
Situation :
1) Incorporated federally.
2) No office or employee or tangible property in Canada. Single shareholder (the director) who performs work from home for worldwide customers (foreign income). The company owns equipment (valued at $200,000+) located in the United States (not constituting a Nexus), cash and shares of publicly traded companies.
3) Currently pays 80,000+$ corporate income tax + personal income tax.
The best plan I have found so far is :
1) Continuance of the corporation offshore. Opening of an offshore bank account. All options other than continuance will trigger taxes on the disposition of assets to the offshore company.
2) Director (mind and management) must relocate in the same jurisdiction. Residency must be obtained, usually by staying at least 180 or 182 (non-consecutive) days.
3) Payment processor can remain Paypal, but payout can only be made to a US bank account. It should be possible as a Canadian citizen to register a US bank account (e.g. perhaps through RBC).
My questions are :
1) The process of continuation is as follows : the offshore corporation is created, a Letter of Satisfaction is obtained and forwarded to the offshore authorities and a Certificate of Continuance is obtained :
https://www.ic.gc.ca/eic/site/cd-dgc.nsf/eng/cs01052.html
1.1) A departure tax is applicable. What properties exactly are taxed? I believe that equipment and intellectual property actively used by the business is not taxed, is that correct? So, in our case, the departure tax is only applicable to the shares of publicly traded companies?
1.2) What could go wrong / how could this process be refused by the Canadian or offshore authorities (e.g. by application of a GAAR rule)?
2) What jurisdiction is most favourable? I find Barbados to be most interesting. Because of its tax treaty with Canada, I expect less friction when eventually repatriating money in Canada. Furthermore, the treaty clearly defines that a corporation is resident where it is national (hence the continuance) and an individual is resident where a permanent residence is established. It appears to be a relatively easy jurisdiction to become resident (i.e. one can possibly stay in Barbados for 180 days without a Visa, leave few days and come back and). Corporate income tax in Barbados is very low (1-5.5%). There is a 12.5% dividends witholding tax, however more careful planning can be done. There is no witholding tax paid on income from foreign source (all our income is from outside Barbados) to non-resident, so leaving the island to pay dividends as a lump sum payment can be done.
I'm very excited by the prospect of lowering my tax burden legally, but this all sounds too good to be true.
Anything else I should know?
Thank you !
