Offshore Tax Havens & Possible Repercussions

Offshore Tax Havens & Possible Repercussions

Improper Structuring

In our experience, a surprisingly large number of so-called Offshore Tax Havens—offshore investments and businesses we're asked to review—are poorly structured. Their owners do not have the faintest idea they are sitting on a ticking, tax time bomb. Unscrupulous promoters sell what they falsely claim to be properly tax planned offshore packages. These are financially attractive because of the low front-end cost. However, when scrutinized by Canadian tax officials, most will not meet the "smell test". Worse, the offshore lawyers, accountants or advisors that set it up will usually not be around to defend you when there is a challenge by the CRA. As the years go by, it may appear that you are getting away with it. The problem is Murphy's law kicks in when least expected. When the taxman is at your door, it's too late to do proper tax planning.

By not reporting offshore transactions or paying taxes on passive international investments, Canadian residents open themselves up both to criminal prosecution for tax evasion and large civil penalties. Before getting caught, the best way out may be to negotiate a Tax Amnesty. As an additional benefit, a good tax settlement allows you to bring your money home. After all, what is the use of having a lot of cash if it sits in an offshore bank or investment account and you can't enjoy it?

Offshore Secrecy Is Dead

After the 9/11 terrorist attack, powerful anti-terrorist and money laundering laws were put in place. As a result, all tax havens, banks and financial advisors can be forced to open their books and provide client information to onshore authorities. Offshore secrecy is dead! Smart people work on this basis when setting up businesses or investments in international forums. Prudence dictates that you have everything done properly and be prepared for a review when taking advantage of supposed Offshore Tax Havens.

To learn more about Tax Havens, read our Offshore and International Tax Planning information.