IMMIGRATION TO CANADA

When a person becomes a Canadian resident for tax purposes, that person will become subject to Canadian tax on that person's world income from the time Canadian residence is obtained.

In the case of an individual, the taxation year of immigration is, in effect, divided into two parts: the part during which the individual was a non-resident; and the part during which the individual was Canadian resident. It is only the worldwide income that is earned during the second part that is subject to Canadian tax. Income earned during the first part of that year will generally only be subject to Canadian tax if it is derived from Canadian sources.

During the year of immigration normal personal tax credits allowed ("personal amounts") are pro-rated based upon the portion of the calendar year during which the individual was resident in Canada.

Capital property owned at the time of immigration is generally deemed to have a cost for Canadian tax purposes equal to the fair market value of such property on the date that Canadian residency is obtained. The main exception to this rule is the fact that it does not apply to "taxable Canadian property" ("TCP"). The most commonly encountered forms of TCP are real property situated in Canada and shares in private corporations resident in Canada.

For non-residents with significant wealth and/or sources of income it is generally advisable to seek Canadian tax advice before immigration to Canada in order to take steps to minimize the impact of Canadian taxation.

One of the most commonly used planning techniques for immigrants to Canada who have significant wealth is the formation of an "immigrant trust" in a tax-haven jurisdiction. If properly structured, this will allow investment income earned during the first 60 months of Canadian residency to be exempt from Canadian taxation.