Are Tax Havens Illegal for Canadians?

 

When I first heard the words “tax haven,” like many Canadians my immediate reaction was, “aren’t those illegal?” Certainly, the connotation seems to be that tax havens are places that enable you to hide money from the government and therefore from taxation, so they must be shady operations. Actual laws and rules surrounding tax havens aren’t always common knowledge, and the unknown can be worrisome.

Hiding money from Canada Revenue Agency is against the law, although tax havens themselves are not illegal, if you follow certain rules carefully. Like many things in life, tax havens are a “use at your own risk” proposition that you should research fully before attempting.

What Is a Tax Haven?

A tax haven is a country and place where money can be sheltered so that the owner of the money can avoid paying taxes on it in his or her home country (i.e., Canada). Many tax havens are countries with low taxation rates, that don’t share information effectively with other countries. However, any country can be a tax haven, even one you wouldn’t necessarily suspect, such as the US.

Under Canada’s taxation laws, residents are required to declare worldwide income. Canada Revenue Agency seems to discourage the use of tax havens because of their use for complete tax avoidance or evasion (which, of course, is illegal).

Author and cross-border financial advisor Robert Keats of KeatsConnelly explains in his book A Canadian’s Best Tax Haven: The US, that as long as a taxpayer is not lying about income and the location of it, tax havens are not illegal, and can in fact save you on taxes legally if you follow the rules and know how to use the system to your advantage.

Where Should You Look for Tax Advice and Tax Haven Assistance?

Protect yourself and your hard-earned money by doing your research. Beware of any tax haven arrangements requiring secrecy or the concealing of income, or that promise unusual benefits or huge returns on investment. As with any financial dealings, there are people who are out to take advantage of those with little knowledge of tax havens and investments.

Tax information for Canadian residents can be found on CRA’s website at www.cra-arc.gc.ca; CRA recommends that those looking for tax haven help get independent advice from a tax professional who is not connected to the tax haven scheme or promoter with which they are considering investing.

For more information about tax havens for Canadians, see A Canadian’s Best Tax Haven: The US , a Cross-Border Series title by Robert Keats, internationally renowned cross-border finance expert from KeatsConnelly. 

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