Offshore investments

[Bryan]

I've been meaning to ask, what do social and law and order conservatives think of the perps being fingered in the Panama Papers?

Some of them may have committed crimes (it certainly appears that way), but having an offshore account is not a crime, nor is incorporating there. We don't yet know for sure which ones were actually breaking the law and which were utilizing a legitimate means of reducing their tax load.

It's pretty much a given it means 1%er's.

Lots of people who don't have anywhere close to that level of assets have legitimate offshore businesses and accounts. There are countries, for instance, where a foreigner has to incorporate there if they want to buy vacation property. Yeah, you need to be able to afford to buy that, but that doesn't necessarily make you a multi-millionaire.

[bush_cheney2004]

It's not even that mysterious, as Canadians were encouraged to have "offshore" bank accounts in the United States several years ago.

http://www.thestar.com/business/personal_finance/spending_saving/2011/01/17/is_it_time_to_open_a_us_bank_account.html

[msj]

Canadians were encouraged to have "offshore" bank accounts in the United States several years ago.

Nothing wrong with that. Most of the times these accounts aren't producing much, if any income anyway - they are like chequing accounts making it easier to buy things, which is their intended use.

Besides, as long as there is less than $100,000 in CDN money in the account then it does not even need to be reported on a T1135 (assuming no other foreign assets are owned ).

But, of course, the US is a major tax haven through the use of shell companies as this simple explanation goes on to say: http://feedproxy.google.com/~r/TheBigPicture/~3/h9AAomPrzcA/

[Bryan]

Breaking the law by evading taxes is not acceptable.

IF they're breaking the law, no it's not acceptable. It's understandable though, and it's what you WILL get if a government tries to rip off it's citizens. People have different definitions of what a reasonable limit is, but most people, if it gets over 50% people will look for ways to reduce this.

No, but I'm not naive enough to think these people go to these lengths to ensure they are meeting their tax obligations by reporting their world wide income on their T1's (or T2's) and their foreign assets on their T1135's.

Again, You're not claiming that there are no legal ways to reduce the amount of tax you pay in one country by incorporating in another, right?

[bush_cheney2004]

Nothing wrong with that. Most of the times these accounts aren't producing much, if any income anyway - they are like chequing accounts making it easier to buy things, which is their intended use.

Nothing wrong at all...and used by regular "folks", not just the 1% to take advantage of currency valuations as well.

[msj]

Again, You're not claiming that there are no legal ways to reduce the amount of tax you pay in one country by incorporating in another, right?

If you are a Canadian resident for tax purposes and you own more than 10% of that foreign affiliate, then, no you can't legally do it.

Look up T1134 and the rules related to that.

[msj]

Nothing wrong at all...and used by regular "folks", not just the 1% to take advantage of currency valuations as well.

Yes, but regular folks don't incorporate shell companies in Delaware and use law firms in Panama to make it easier to buy a purse at the Coach outlet store.

[bush_cheney2004]

Yes, but regular folks don't incorporate shell companies in Delaware and use law firms in Panama to make it easier to buy a purse at the Coach outlet store.

Right, but the concept is the same....to legally take advantage of offshore accounts to reduce tax liability, use banking products for purchases/investment in other countries, hedge against currency valuations, etc.

Rich people should be able to do this too as long as they comply with the laws/tax code(s).

[msj]

Rich people should be able to do this too as long as they comply with the laws/tax code(s).

Where have I stated that anyone can't make use of certain strucutures?

Go right ahead.

Just be sure to report the income and fill out the foreign reporting forms T1135 and T1134 as required.

Otherwise, don't expect me to give a fig when a leak happens and the CRA nails them for $2,500 per year penalties for not filing the form and interest and penalties on back taxes.

Boo hoo hoo for the tax evaders.

[bush_cheney2004]

Where have I stated that anyone can't make use of certain strucutures?

....Boo hoo hoo for the tax evaders.

There is no disagreement here....I just wanted to point out just how widespread "offshore accounts" are for regular people, not just the hated "1%".

And I am certain that some of the small fry screw up compliance too....it's just a matter of degree.

Edited April 10, 2016 by bush_cheney2004

[eyeball]

Right, but the concept is the same....to legally take advantage of offshore accounts to reduce tax liability, use banking products for purchases/investment in other countries, hedge against currency valuations, etc.

Rich people should be able to do this too as long as they comply with the laws/tax code(s).

The trick is getting the CRA to ensure compliance as efficiently and directly as it does for un-rich people. Hopefully the real fallout from this will be the tightening of rules and accounting practices.

With 40 years worth of offshoring accounts to review, from just one company in just one haven...I suspect there will be very very little justification for laying anymore taxes on us captive taxpayers without proving there isn't some change still rattling around the pockets of the rich that we can't or shouldn't pick first.

Peanut butter works best on rat traps.

Edited April 10, 2016 by eyeball

[msj]

And I am certain that some of the small fry screw up compliance too....it's just a matter of degree.

Of course there are mistakes made.

The most common voluntary disclosure I do for clients?

The people with US stocks in investment accounts who did not realize until brokerages started to issue "foreign asset reports" two years ago that they were in fact over the $100,000 CDN limit and needed to file a T1135.

No big deal since they were reporting the income on their tax returns (per their T3 and T5 slips) all along.

File the voluntary disclosure to avoid the penalty for not filing the T1135 form and no further consequences other than my bill.

[SpankyMcFarland]

Revenue seem to adopt a profit-oriented approach to this kind of thing which has become the other side of tax avoidance, i.e. if the target can be easily intimidated, go after him but avoid the big fish - too many legal bills. Equity doesn't enter the picture and thus respect for the system slowly dies.

Offshore accounts are not illegal in themselves but are a risk factor for illegal activity of many sorts. Notice how often they are described as 'completely', 'entirely' or 'perfectly' legal. An activity above suspicion would not attract so many adjectives.

Edited April 10, 2016 by SpankyMcFarland

[SpankyMcFarland]

Right, but the concept is the same....to legally take advantage of offshore accounts to reduce tax liability, use banking products for purchases/investment in other countries, hedge against currency valuations, etc.

Rich people should be able to do this too as long as they comply with the laws/tax code(s).

Which their minions write.

[Bryan]

If you are a Canadian resident for tax purposes and you own more than 10% of that foreign affiliate, then, no you can't legally do it.

You do know that there are Canadian tax lawyers who openly specialize in structuring things so that they don't fit that specific narrow box, right?

[msj]

You do know that there are Canadian tax lawyers who openly specialize in structuring things so that they don't fit that specific narrow box, right?

Yes and I bet I can name more than you can and have talked to more than you have too.

Doesn't change the fact that if you and your spouse own a shell company in, say, Panama, at 50% each then you gotta follow the T1134 and foreign affiliate rules.

Or, if you only own 9.9% of that shell company then you have to follow the rules for T1135's.

Either way, there is reporting of income that must take place at some point (yearly for the foreign affiliate and as received for the non-affiliate).

Anything else is taking advantage of the anonymity of these corporations which means tax evasion.

[Bryan]

Yes and I bet I can name more than you can and have talked to more than you have too.

And they don't all agree with your interpretation do they?

[msj]

And they don't all agree with your interpretation do they?

They follow the law as far as I know.

Which means they don't know what happens to that management fee that happens to go to some shell company that is being looked after by that firm on some island somewhere.

Or they don't know that the transfer pricing is inappropriate.

Or they don't know many things.

That's the point of using lawyers in different jurisdictions: through the use of such structures it may appear that you are following the law when in fact you are evading taxes.

Hence the use of anonymity for shell companies.

Edited April 10, 2016 by msj

[Bryan]

They follow the law as far as I know.

Do any of them disagree with you about what is not legal? About what you can do right out in the open?

[jacee]

In my understanding ... All of what they do is legal ...

EXCEPT failing to report income and pay taxes to Revenue Canada.

[msj]

In my understanding ... All of what they do is legal ...

EXCEPT failing to report income and pay taxes to Revenue Canada.

This.

I incorporate an offshore shell company which is completely unknown and anonymous and legal.

I work in, say, Vietnam for the O&G industry and make good money doing that but report all of that on my Canadian tax return because my residence is still in Canada.

I work on the side for an outfit in a different country, say I go to Mynamar for consulting work as they are in the exploratory stages, and it is there that my offshore company gets paid.

So far so legal and far closer to being true than any of you will ever have experience with.

It is when I leave the money earned in that company, or transfer it to a bank account in another offshore location and then fail to report this on my Canadian tax return that the evasion of taxes occurs.

Since the offshore company is a foreign affiliate I must report the income on my CDN tax return as if I had earned it in Canada.

I also must fill out the T1134 disclosing my offshore company's financial statements and certain other information.

Then, when I transfer that money, assuming I have an excess of $100,000 in total, to that offshore bank account, then I must disclose this existence using T1135.

If I earn interest income on that account then I must report that in Canada and pay tax on it (tax must be paid on my worldwide income so even if the funds are less than $100,000 I still must report the income earned).

So, yes, this can be done legally.

The temptation, however, is to not report the income and ownership of these assets since it is possible to leave the money offshore and then one can travel and use the funds as appropriately when outside Canada.

After all, what the government doesn't know won't hurt anyone and I already pay high taxes and, and, and insert your excuse to justify evading taxes here.

I make no excuses for evading taxes as there are lots of perfectly legal ways to keep your tax burden down to live a luxurious lifestyle if one wants.

But certain other people on these forums do make excuses for tax evasion.

[msj]

Do any of them disagree with you about what is not legal? About what you can do right out in the open?

For a guy who doesn't understand the basics of the tax instalment system I'm not going to waste further time explaining to you about specific rules.

If you want to learn more about how to specifically evade taxes despite the rule in the Income Tax Act that if you are a Canadian resident for tax purposes then you must report all of your worldwide income (pretty broad rule, no?) then seek that advice yourself.

[msj]

I will hazard a guess and say that if any of the Canadians found in the Panama Papers had a Vianca Scott on their board then they deserve a good hard look:

A woman named Vianca Scott appears to currently sit on the boards of 10,361 Panama companies, the vast majority of which are offshore firms set up by Mossack Fonseca.

But a Dutch broadcaster with access to the Panama papers has found that Scott died in 2005. This did not seem to stop her joining the boards of new companies, signing papers, showing up at meetings and getting elected as a company secretary, the leaked documents show.

http://features.thesundaytimes.co.uk/web/public/2016/04/10/index.html?CMP=Spklr-_-Editorial-_-TWITTER-_-thesundaytimes-_-20160409-_-News-_-426343194-_-Imageandlink&linkId=23277846

[blueblood]

Maybe if the 1% actually carried their weight everyone's taxes could be lowered. As I'm sure you'd agree it's wrong when ordinary taxpayers have to pick up the tab that slackers leave behind.

The 1% do carry their weight. They spend more, invest more, save more in the bank, and hire employees.

Rich people putting money in offshore accounts is what happens when people like you play the class warfare game and feel sorry for yourself. Its why venezuela is a cess pool and why irelands gdp is taking off...

[jacee]

I will hazard a guess and say that if any of the Canadians found in the Panama Papers had a Vianca Scott on their board then they deserve a good hard look:

http://features.thesundaytimes.co.uk/web/public/2016/04/10/index.html?CMP=Spklr-_-Editorial-_-TWITTER-_-thesundaytimes-_-20160409-_-News-_-426343194-_-Imageandlink&linkId=23277846

It's still a mystery to me why no Canadian or American names are surfacing yet ...

Can you imagine the flurry of activity going on right now. I'm sure they're all getting their tax forms done. There could be a real tax windfall for Trudeau!

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