Bahamian Tax Benefits for Canadian Investors

bahamian tax benefits for canadians

Despite Canada's wide reaching financial laws on income and restrictions on tax havens, the Bahamas can still serve as an ideal place to invest in, for non-residents.

In contrast to tax law in the United States, income taxation is based on residence, rather than citizenship. This means that while Canadian residents are taxed on any of their worldwide income, non-residents are only taxed through a withholding tax regime on certain specific kinds of investments.

These investments include things like:

    • Income from employment in Canada

    • Business carried out in Canada

    • Gains realized on the disposition of taxable Canadian property

Corporations that are non-residents of Canada follow much the same guidelines. However, all Canadian companies incorporated after April. 26, 1965 are automatically residents. It should also be noted that some corporate changes can trigger a re-corporation as far as income taxes are concerned, meaning new tax guidelines apply.

Canadian Withholding Tax

The basic Canadian holding tax is 25%, and applies to:

    • Investment income

    • Certain pensions

    • Dividends

    • Certain types of royalties

    • Income from a trust

This amount is withheld from the gross payment by the payer, unless the recipient resides in a country that Canada has a special treaty with. In these cases, the withholding tax is lowered to 15% or less. Old-age security payments are also subject to this withholding tax.

Special Exemptions

There are a few special exceptions to the withholding tax. For instance, interest paid by a Canadian resident corporation to an "arm's-length" non-resident creditor is exempt from paying this tax. This applies regardless of the currency of the loan or interest.

The Benefits of Investing in the Bahamas

There are few tax haven countries anywhere in the world that can match the professional services available here. The Bahamian economy can support a whole range of corporate structures, in addition to fantastic accounting, banking and legal services.

Best of all, for non-residents of Canada that have homes in the Bahamas, no local income taxes apply. They'll only be responsible for paying Canadian income tax for business done in that country, gains from taxable Canadian property or the withholding tax on specific investment types.

Becoming a Non-Resident

Generally becoming a non-resident of Canada required giving up property and most other attachments in the country, including medical coverage, bank accounts, credit cards and the like. You'll also have to acquire residence in another country, by purchasing or renting a home. Once you have the non-residents status, there are no restrictions on returning for temporary visits. You won't be required to pay any taxes.

**The above information comes courtesy of the Bahamas Handbook

Posted by Helen Dupuch on
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