How to Legally Pay Less Taxes as a Canadian? 🇨🇦🇨🇦🇨🇦
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Today we are going to cover International Tax Planning for Canadians or How How Canadians Can Pay the Lowest legal amount of Tax possible by setting up International Structures.
Recently I had a Canadian client who was running most of the business through Canada, despite the fact that lots of their operations and partners were abroad. This is not very optimal, as they were paying way more tax than they should.
Let's note that Canada has a small business tax rate that's not very unreasonable, the federal rate is 9% and on top of that, there's the provincial rate that will vary by province and can be anywhere from 2-3%. So this means that you will end up paying 11-12% in tax as a small business. This is for up to 500 000 CAD in profit per year.
Having this in mind, if you're a small business that makes less than half a million CAD per year, it doesn't really make much sense for you to structure yourself internationally.
However, once you cross the small business threshold it makes a lot of sense to do so. Once you make more than this amount you will be paying 26,5% in Ontario on the corporate level. In certain cases this rate will be higher.
It's also important to note that Canada actually has one of the most favorable international tax laws, even though domestic ones are not so great. This means that it's easy to have a foreign company, make money, get taxed at a favorable tax rate (ideally zero) and then bring money back to Canada tax-free.
One important thing to keep in mind is that you will need some operations abroad as you will need to have substance. If some of your work can be done abroad that's what you should be aiming for. Also, from a purely financial point of view, it makes lots of sense to hire abroad, since the costs of hiring in Canada are much higher.
First thing, you need to form a company abroad. But it's not so simple to choose a country since there are many things to pay attention to besides the headline tax rate. You will want to choose a country where you'll be able to take advantage of what's called ''the exempt surplus rules''. This means that you need to set up in a country that has a tax treaty with Canada. Historically, Barbados was often used for this purpose.
Another very important thing to keep in mind when talking about taxation of companies by the Canadian government is that the management and control rules are what determines whether your company will be taxed in Canada or not. This means that your company can not be run from Canada unless there is a tax treaty that overrides these rules. Ideally, your company is actually managed and controlled from abroad.
Your foreign company should be owned by a Canadian company. How to transfer money from a foreign to a Canadian company will depend on your type of business, so we need to plan what makes the most sense for your situation.
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We are Offshore Citizen team. We help people become global: get a second passport, set up a second residency, pay less taxes, do banking abroad, etc.
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Пікірлер: 42
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This is extremely helpful
@OffshoreCitizen
3 жыл бұрын
You're welcome
Great video I own a Canadian company that needs to go this route very soon. I'm wondering is all your work backed up and signed off on as 100% legal and effective by a credible Canadian tax lawyer and Canadian tax accountant as I take it you are the tax advisor and the set up guy but I just want to be 100% sure it's confirmed by the other two professionals I mentioned above. I'm sure you are very good but I just want to dot my i's and cross my t's. Very insightful information and exactly the information I was looking for. Thank you.
Wow 50% tax discount is huuugeeeeee
Great video! Would you please make a video, if you didn't already, about the regular guy/girl (9-5) and how can they legally reduce their taxes with creative and new ways?
@albertplumer
2 жыл бұрын
Right ,always employees are omitted ,perhaps because the huge number who aren't business owners .
What about Canadian digital nomads living abroad but working for a Canadian company?
Wow this is amazing! So would this work for example in the US or UAE whereby you have an operating company in either or and structure yourself the way you mentioned in the video. Also having the dividends flow tax free into the holding company in Canada and then paying yourself dividends from that holding company?
@OffshoreCitizen
3 жыл бұрын
So, it's worth noting to begin with that substance matters. UAE isn't good for Canada, I mentioned that in another video. The US can work in some cases but the substance and structure need to be right. It's always case by case and needs to be wrapped around your unique circumstances. Feel free to book a call and we can discuss how it applies to you if you like: calendly.com/michael-rosmer/offshore-citizen-30-min?back=1&month=2020-11
This definitely applies to me, thank you!!! Would this work with a Romanian company? (1 or 3% tax on revenue there for up to 1 million euros revenue)
@MichaelRosmer
2 жыл бұрын
It can but that's not usually the best option
Hello Michael, thanks for these informative videos. Came across your channel while looking for info on Labuan, and have been hooked ever since! Just curious, but is there ever a chance you could do a video on investment options for Canadian expats abroad? Investing back in Canada, say in a TFSA or RRSP, inevitably invokes the wrath of the CRA. Aside from CI Direct Investments, I don't know of many options for Canucks abroad looking to avoid getting hit by CRA penalties. If you could, it would be very much appreciated! - Canuck professor in Tokyo
@OffshoreCitizen
3 жыл бұрын
Well for Canadians it's about where you are resident not your citizenship so planning around that residency is the first most important piece.
@westminsterelite
3 жыл бұрын
@@OffshoreCitizen Ah, that stands to reason. My issue is that I never declared as an official non-resident, as I wanted to keep my residential ties to Canada since I intend to return one day. I suppose that limits my choices considerably, as I live in Tokyo, but would be considered a "factual resident" of Canada. Would you happen to have any suggestions, even if it's just pointing me in the direction of where I should look for investing options under these circumstances? A long time ago I got hit by the CRA for (foolishly) adding to my TFSA while living abroad, so I'm just wary, and don't really know where to begin due to the tax implications. Any help would be very much appreciated! PS - Love your content. It's become my favourite channel on YT. Keep up the great work.
Nice! I’m personally shocked how it works (or doesn’t work) for Canadians when they relocate to UAE, or some other zaro tax countries. Seems very unfair and ridiculous in my opinion.
@MichaelRosmer
3 жыл бұрын
Yeah it's a weird treaty
@jamestewari-hh7et
2 ай бұрын
Canadians are friendly but taken advantage of by others.
@jamestewari-hh7et
2 ай бұрын
I have 60000 USD is it enough to start a business
Great video, very detailed. First question, As a canadian: Say for example you made a large amount of money overseas, could you repatriate that money back home to canada through a Labuan or Singappre company structure, though you have not been resident for 182 days? Last question, What are your thoughts about the British Columbia LLP structure for business set up? Is it the best structure for a canadian resident who lives abroad and wants to send money or dividends home without paying tax? Just wanted your thoughts as a fellow Canuk!
@OffshoreCitizen
3 жыл бұрын
If you're not Canadian tax resident you don't need to worry about Canadian tax. Though the question is where are you resident?
@yusufissa2296
3 жыл бұрын
@@OffshoreCitizen what if you want to bring back the money you made? What would be the smartest way to go about doing that?
@MichaelRosmer
3 жыл бұрын
@@yusufissa2296 if you made it as a non resident you're fine. The key is were you actually a legal mom resident or were you simply out of the country for an extended period of time?
@yusufissa2296
3 жыл бұрын
@@MichaelRosmer I am based in Istanbul, Turkey at the moment, we run a factory that currently exports to Pakistan and India. We have been here for 2 years now and doing well. I just wanted to know generally what the best arrangement would be.
Are u a cpa or tax lawyer?
If the susidiary company is bought, do you pay capital gains tax in canada?
@MichaelRosmer
2 жыл бұрын
It depends but generally yes
Is it possible to claim management and control of the overseas corp while remaining tax resident in Canada as an individual?
@OffshoreCitizen
3 жыл бұрын
Yes but this requires genuine foreign management or a tax treaty that has a favorable tie breaker
@OffshoreCitizen
3 жыл бұрын
Feel free to book a call to discuss how it applies to you www.clarity.fm/michaelrosmer
@luozhan
7 ай бұрын
Hello Michael, enjoyed your video! I’d appreciate it if you could create a video comparing the advantages of establishing an International Business Company (IBC) in Barbados versus the Cayman Islands. Thanks!
Hello. I have an Amazon FBA Business that I just started with my brother 1.5 years ago and we get our product manufactured in china but we sell on Amazon Europe, Canada and mainly 90% of our sales are in the USA. We are dual citizens. We hold Egyptian and Canadian citizenship (currently residing in Alberta) and we are thinking of becoming non-residents of Canada and returning to Egypt to live there for the next 5-7 years as we want a change and we also want to save on taxes. We already have a Canadian corporation that we operate our business from and we make about $3k in profit monthly from our Amazon business. Question: Are we able to build our online business tax-free if we were to become non-residents of Canada (we do not have any operations in Canada. We only sell in Canada)? Also if I want to return to Canada in 5-7 years, would I be able to return the money made from my business back to Canada without paying any taxes? Thanks and would love to hear what you have to say :)
@OffshoreCitizen
2 жыл бұрын
Great question. The answer is what you're asking to do is possible but the nuances matter it's not so simple as say just leaving and there's lots of possible land mines especially if you eventually intend to return. The best option is to book a call and we can go over your specific situation and guide you on the best solution for you calendly.com/michael-rosmer/
I can work anywhere from Canada so which province should I live in to optimize for tax ?
@MichaelRosmer
2 жыл бұрын
Usually Alberta but better is to leave Canada altogether
@offshore citizen Simple question for you; I haven’t had any luck elsewhere. Assume I qualify for CPP of $1000/mth. I marry in the Philippines and leave Canada to retire. I pass on in 20 years; does my non-Canadian Filipina wife get survivor benefits? Thanks in advance...
@MichaelRosmer
3 жыл бұрын
Good question I'm not an expert on CPP so I couldn't say
@anilgoel1475
3 жыл бұрын
@@MichaelRosmer Ok, thanks anyway. Just thought I’d ask...
Hello, I have dual citizenship Canadian and Ukrainian and I would like to apply for e-residency in Estonia fo start an LLC for my social media agency with my Ukrainian passport, cause majority of my clients are abroad. I have lived abroad for years and now I wanna come back to Toronto. Should I open an Estonian company with my Canadian Passport or with Ukrainian? And is there any option for me to pay zero or minimum taxes to be able to leave in Canada, not abroad? Thanks indeed