Offshore company - Crypto - Canada

[TommyB]

Hi Guys,

I am looking to protect my crypto asset and reduce my tax burden by exploring an offshore structure.
I reside in Canada. I trade crypto from there. I'm looking at different jurisdiction and I want something with simple reporting as I'm a one man show. I know ideally would not live in Canada. But for a few years I'm stuck here.
I have 2 citizenships Canadian and French. I live full time in Canada. I trade from Canada and so would operate the IBC from Canada. I don't intend to use the profits as income in Canada. Profits will stay in the corporation in Defi or spent via a Crypto payment card. I essentially want my portfolio to grow without a government trying to empty it.

Thanks for sharing your knowledge!

Cheers!

 

[Sols]

It always comes back to residency. Do you live in Canada? Then Canadian tax law applies. Aside from moving, there really isn't much you can do about that, unless your wealth allows for setting up tax residence somewhere else (an office, 1-2 real enough employees).

Once countries start seeing the success of CRS, they are coming for crypto exchanges and similar businesses next. I wouldn't count on storing funds in crypto as any sort of long-term secrecy plan.

You can always try the route of local professional directors for a company in Isle of Man, Gibraltar, Cyprus, or Malta. I see setups like that quite a lot and it seems to work, as long as you keep a low profile, and pay fully taxes on your dividends in line with local law. A tricky part might be finding someone who's happy to let you trade freely without the local directors' involvement. Discuss with some service providers.

 

[Tr0nad0r]

If I understand the law correctly even if your offshore company isn't located in Canada it's considered a Controlled Foreign Corporation (CFC) and subject to Canadian taxes if the management or controlling shareholders have fiscal residency in Canada.

 

[TommyB]

It always comes back to residency. Do you live in Canada? Then Canadian tax law applies. Aside from moving, there really isn't much you can do about that, unless your wealth allows for setting up tax residence somewhere else (an office, 1-2 real enough employees).

Once countries start seeing the success of CRS, they are coming for crypto exchanges and similar businesses next. I wouldn't count on storing funds in crypto as any sort of long-term secrecy plan.

You can always try the route of local professional directors for a company in Isle of Man, Gibraltar, Cyprus, or Malta. I see setups like that quite a lot and it seems to work, as long as you keep a low profile, and pay fully taxes on your dividends in line with local law. A tricky part might be finding someone who's happy to let you trade freely without the local directors' involvement. Discuss with some service providers.

Thank you very much for the information Sols!
I want to lower the tax burden. I am not seeking avoidance. In Canada we have a high taxation rate... And yes, my residency is Canada.
Thanks for the jurisdictions. I will focus research on those.

 

[TommyB]

If I understand the law correctly even if your offshore company isn't located in Canada it's considered a Controlled Foreign Corporation (CFC) and subject to Canadian taxes if the management or controlling shareholders have fiscal residency in Canada.

Thanks Guilleiguaran. That is how I understand the CFC as well.
My understanding goes that if you have an IBC but reside in Canada with only 1 shareholder that is in Canada, you are running the "management or control" from Canada. So you would face the same tax obligations a corporation registered in Canada would. At that point you might as well just incorporate in Canada. This is my current understanding and by no mean 100% accurate.

 

[Tr0nad0r]

Thanks Guilleiguaran. That is how I understand the CFC as well.
My understanding goes that if you have an IBC but reside in Canada with only 1 shareholder that is in Canada, you are running the "management or control" from Canada. So you would face the same tax obligations a corporation registered in Canada would. At that point you might as well just incorporate in Canada. This is my current understanding and by no mean 100% accurate.

That's my understanding for companies with single shareholders as well (I'm not 100% sure neither). With multiple shareholders, it gets a bit more complex but it can still be a CFC if you can have the control together with other shareholders related to you and other four Canadian residents. The definition on the OCED site is this:

Generally, a CFC is a "foreign affiliate" that is legally controlled by the Canadian shareholder, or that would be controlled by the shareholder if the shareholder owned all of the shares of the foreign corporation that are owned by the taxpayer, persons that do not deal at arm's length with the taxpayer, and any other four Canadian residents. A "foreign affiliate" of a Canadian taxpayer is a non-resident corporation, where at least 1 percent of the shares of any class are owned, directly or indirectly, by the Canadian shareholder and at least 10 percent of the shares of any class are owned, directly or indirectly, by the Canadian shareholder together with related persons.

Please publish any other information that you find about the topic here, this information would be very valuable for other fellow Canadians as well.

 

[TommyB]

That's my understanding for companies with single shareholders as well (I'm not 100% sure neither). With multiple shareholders, it gets a bit more complex but it can still be a CFC if you can have the control together with other shareholders related to you and other four Canadian residents. The definition on the OCED site is this:



Please publish any other information that you find about the topic here, this information would be very valuable for other fellow Canadians as well.

Thank you! Lot of information on the OCED site.

The "management and control" rule is explained here.

Anyone knows of a good firm in Canada that can assist with these matters?