The number of tax haven countries and territories that are available in the world is on the decline as more and more countries are signing international treaties that will allow them to share the financial information between them and this will bring transparency to the financial transactions that are done across the globe. In general, using such countries and territories was considered as an offshore planning exercise by many, but the fact is that it not regular tax planning but an aggressive one and will be considered to be a form of tax evasion.

Tax Haven Arrangements

There are different arrangements that are possible when it comes to the use of such havens and some of them are being reviewed by the Canadian Revenue Agency.

• Tax Shelters – This is a sort of a gifting arrangement or acquiring a property where the tax benefits that are available to you will be equal to or more than the cost that you have had to spend for it.

• Offshore Investment Entities – These are companies that are located in tax haven countries and are used to reroute the investments and it is done to delay the taxation that one will have to pay for the income that is earned from these investments. It is wrongly attributed to offshore tax planning and is in fact a type of aggressive planning.

• Welfare And Health Trusts – There are payments that are made to trusts in safe haven countries and are reported to the tax authorities as payments made for employee health plans for tax deductions.

• Spousal Trusts – To avoid capital gains that are made from the sale of shares of any Canadian business, taxpayers will resort to the emigration of trusts or use of trusts in safe haven countries.

• Arranged Loss Trading Schemes – Capital gains that are gained when dealing with agents or brokers who are in the haven countries are not reported, but if there are any capital losses, they report to the CRA. This is to help to save tax by showing losses incurred during the year.

Offshore Tax Planning Misconceptions

There is a basic thought among tax payers that using tax haven countries is a form of offshore tax planning and that they will be able to project them offshore investments if they are brought up by the tax authorities. The fact is that international tax planning is very complex in nature as it will involve a lot of procedures and approvals to be put in place in a legitimate way and it is definitely not in any way related to the countries that provide a haven for people who are looking to save tax in an illegal way. Offshore tax planning is considered to be a legitimate way to enhance your business and personal assets while ensuring safety of the assets.

Offshore Tax Planning Methods

There are many different options available to people who are looking at offshore investments to help them reduce the tax that they will have to pay in a country. But one as to ensure that only legitimate route are chosen as there are many illegitimate activities that can be done when we consider offshore tax planning. It is also known as international tax planning as you take your funds to an international location to operate a business or to invest in an existing business.

To add a comment please login by clicking here