MAXIMIZING TAX EFFICIENCY IN CANADA: LEVERAGING TAX HAVENS FOR SAVINGS

Introduction:

The Canadian Tax System is based on residency and usually runs through the first day of the year to the last. The comprehensive tax system has been designed so that the bustling publicly- funded health and social services for the citizens of Canada can remain working. The income tax system is applicable on anyone who is a resident of Canada and requires you to include both income generated outside and inside the country.

Such taxation of income arising outside the country along with inside is many times unfavorable to entrepreneurs and business. The best possible way to protect your money from unnecessary taxation is to avail the benefits provided by countries acting as tax havens. The country of Panama is one such example where the Panamian authorities provide opportunities to business and individuals based out of Canada to avail permanent residency in Panama and reap the benefits of their less stringent tax system.

Taxation in Canada:

The tax system in Canada is based on marginal rate of taxes i.e. the tax increases with the increase in income. Along with this marginal rate there are also separate tax rates for Business, Personal, Partnership International, Corporation, and Trust Income Tax. These rates differ depending on the province that you may reside in or have the business in.

Concept of Tax Havens:

Tax Haven is a term that refers to countries or offshore financial centers which offer a minimal tax liability to foreign individuals and businesses. These individuals and business need not operate put of these countries providing tax benefits. Tax Havens profit by attracting capital into their countries by way of investment. This capital is then used to develop a flourishing business and financial sector in the country. It is a very sophisticated method of inviting capital which provides dual benefits to the tax haven country as well as the individuals or businesses opting to come to these countries.

Taxation in Panama:

There are several options for any foreigner looking to avail lower tax rates in Panama to apply and become a tax resident of Panama. A tax residency is separate from permanent residency and focuses solely on tax obligations, whereas a permanent residency refers the legal status of a person which allowing such a person to live and work in a country but need not imply a tax residency automatically. The different options for visas that Panama provides to people are:

1. Friendly Nations Visa: This visa is a special immigration program that allows people from specific countries who have good relations with Panama such as US, Canada, Australia, UK etc. to receive permanent residency and avail tax benefits. There are three ways that you can go about getting this visa:
   • Own a Panamanian property with a value of at least US$200,000.
   • Open a Panamanian corporation.
   • Deposit at least USD 200,000 in a national bank in Panama.This method can take up to three years to get a permanent residency in Panama.
2. Pensionado Visa (Retirement Visa): this is a visa that is offered to persons who have retired. Any person who can prove that they have a minimum monthly pension of $1000 USD for the rest of their lives can apply for this visa. If the pension amount is less than the abovementioned then you will have to purchase real estate at least of the amount of $100,000 USD to qualify for this visa.
3. Golden Visa: The Golden Visa program is the fastest method provided by Panama to become a Permanent Resident of the country and avail tax benefits. This visa provides permanent residency instantly upon approval which is normally done in about one month. However, maintaining the residency is contingent upon visiting Panama atleast two times in one year. The requirements for getting this visa are through investment into the country. These options are:
   • Investment of $300,000 USD in real estate in Panama which is free of liens.
   • Investment of $500,000in securities on the Panama Stock Market
   • A deposit of $750,000 with a licensed bank in Panama.The application process can take 1-2 months for approval and provides instant permanent residency with a chance to apply for citizenship.Benefits of working with Pacific Legal:The team at Pacific Legal has an expertise and deep understanding of the application processes in helping their clients save tax. We have a nexus of lawyers as well as real estate brokers that can help our clients settle in Panama as soon as possible. Through our network we work to ensure the best possible solutions for our clients while taking complete care of each and every transaction in their journey to availing the benefits of the tax haven that is the Republic of Panama