How to save taxes by moving your business offshore
Canada is generally considered a high tax jurisdiction. It is ranked # 25 in the world for highest taxes which is higher than the United States.
By moving yourself and your business offshore to a low-tax or no-tax jurisdiction, you could save 80% or more of the taxes you pay in Canada. In addition, depending on the type of business you are in and where you move to, you could also save a substantial amount in labour costs and other operational costs.
You also have to move yourself not just your business. This is because under Canadian tax laws, a company is deemed to be resident in the place where the central management and control is exercised. So, if you reside in Canada, but you’ve set up your company in Dubai, for example, the Canada Revenue Agency will deem your Dubai company to be resident in Canada and it will be subject to Canadian income tax laws.
But you don’t have to live where your business is based. You could choose to live in Spain or Portugal, for example, because you like the Mediterranean climate and want to be in Europe, but have your business headquartered in Dubai.
It’s best to think about moving offshore BEFORE your business gets too big. It will be more difficult to move a $20 million a year in revenue business that has assets and substantial operations already established in Canada. There may be capital gains tax, departure tax, transfer pricing penalties as well as logistical obstacles to consider.
Don’t just think of the usual “tax haven” jurisdictions in the Caribbean for going offshore. There are numerous other low-tax or no-tax jurisdictions that offer a better business infrastructure, better banking facilities, lower operational costs, as well as government incentives and second citizenship for foreign investors. Think first, about where you want to live, and then where you want your business to be based. There is no “one size fits all”. Your individual plans should be tailored to you.
By moving yourself and your business offshore to a low-tax or no-tax jurisdiction, you could save 80% or more of the taxes you pay in Canada. In addition, depending on the type of business you are in and where you move to, you could also save a substantial amount in labour costs and other operational costs.
You also have to move yourself not just your business. This is because under Canadian tax laws, a company is deemed to be resident in the place where the central management and control is exercised. So, if you reside in Canada, but you’ve set up your company in Dubai, for example, the Canada Revenue Agency will deem your Dubai company to be resident in Canada and it will be subject to Canadian income tax laws.
But you don’t have to live where your business is based. You could choose to live in Spain or Portugal, for example, because you like the Mediterranean climate and want to be in Europe, but have your business headquartered in Dubai.
It’s best to think about moving offshore BEFORE your business gets too big. It will be more difficult to move a $20 million a year in revenue business that has assets and substantial operations already established in Canada. There may be capital gains tax, departure tax, transfer pricing penalties as well as logistical obstacles to consider.
Don’t just think of the usual “tax haven” jurisdictions in the Caribbean for going offshore. There are numerous other low-tax or no-tax jurisdictions that offer a better business infrastructure, better banking facilities, lower operational costs, as well as government incentives and second citizenship for foreign investors. Think first, about where you want to live, and then where you want your business to be based. There is no “one size fits all”. Your individual plans should be tailored to you.