Canada, an oversea tax haven ?

• intended only to new immigrants who may benefit from a five years tax break;
• granted only once in the life of the new immigrant.

This tax break is valid from the time the new immigrant becomes a fiscal resident in Canada through an immigrant trust. It is therefore necessary to establish the trust BEFORE becoming a fiscal resident in Canada.

Once the trust is set up, it receives all the taxpayer worldwide income.  The taxpayer is not liable for the tax payable by the trust. The trust distributes capital amounts not income to the grantor – the immigrant – such capital amounts not being taxable in Canada in the hands of the taxpayer having established the trust .

Thus, the new immigrant enjoys a tax break in Canada in respect of income paid to and from the trust. The trust incorporated in a tax haven is not subject to Canadian fiscal laws.

After 5 years, the capital amounts accrued in the trust may be repatriated to Canada tax free or subject to a new tax planning.

This tax break is for people with minimal assets to establish the trust. This is the case of those who are eligible to immigrate under the investor category.

Immigrating to Canada as an investor

Two business immigration programs as investors exist:  the Canadian federal government and the one from the Government of Quebec.

The federal is intended for people interested in settling in other parts of Canada but not in Quebec, while the Quebec one, is intended for people interested in settling in Quebec.

The criterions:

• Minimal net worth of CDN $ 1.6 million (€ 1,150 million) acquired through lawful economic activities,

• Business experience of a least two years in a lawful and profitable business or within a government or an international organization, acquired through the full-time exercise of duties related to planning, control and management of financial, material or human resources.

• Investment of $ 800,000 CDN (€ 575,000) for 5 years without interest and without refund.

The total sum of $ 800,000 CD may be paid by the immigrant and the amount will be recovered after five years.

However, since this investment does not provide any return over five years, Canadian financial institutions have developed a loan program to the investor under market conditions. In exchange for the upfront payment of the cost of the loan, the financial institution pays to the government the total of the investment amount ($ 800,000 CD) on behalf of the investor. The investor is therefore not obliged to use all its cash to pay the required investment amount of $ 800,000 CD.

The financial institution takes on the risk of the loan. The investor is discharged from the loan made by the lender upon payment of the cost of the loan. At the end of the five year period, the amount returned to the lending institution to pay back the loan.

These programs are fully guaranteed by quality grade “A” commercial documents and the federal and provincial governments and rely on the security of the Canadian banking system.

The five-year period begins with the selection certificate for candidates to Quebec, while it begins with the granting of the right of landing elsewhere in Canada.

Processing times

Prospective investor applicants are entitled to priority processing in Quebec. After a selection decision by Quebec, an application must then be made for obtaining the Canadian visa. During this process, all applicants must undergo a medical examination and a security check. Except for safety or health reasons during the federal processing, Quebec’s decision is final .

In the end, a residency visa is issued to all persons in the family unit included in the application and the visa issued confirms the end of the immigration process. The right of landing as a permanent resident of Canada is obtained at the Canadian border.

Citizenship may be obtained three years after the grant of the right of landing, subject to the applicable conditions.


Published in the Fall 2013 Newsletter Cabinet FWPA Paris.

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