Daily Archives: February 3, 2010

How will new Canadian tax and trust ruling impact Barbados offshore financial industry?

Canadians are some of the largest users of our Bajan offshore financial resources

An interesting article came in this morning via an email from reader “Frank”. I’m not sure what the full implications are for Barbados, but the article in the Ottawa Citizen talks like things just changed in a big way for Offshore Trusts in Barbados that are run by Canadians. Here are a few excerpts…

Canadian Court just changed the rules after 30 years!

The new rule is that a trust with multiple trustees resides where a majority of the trustees reside if the trust instrument permits majority decisions on all matters within the discretion of the trustees and the trustees actually discharge their fiduciary duties.

(snip)

The issue before the Tax Court in Garron was whether a Barbadian Trust was resident in Barbados or in Canada. One determines this issue by looking at where central management and control of the trust actually resides. In Garron, Canadian residents made the key decisions on the trust’s investments and distributions. The Barbados trustee performed mere administrative functions. The Barbados trustee had minimal, if any, involvement in the affairs of the trusts other than to act as functionaries in the execution of agreements and in administrative, accounting and tax matters.

The trustee was an arm of an accounting firm formed to provide services that were complementary to its core practice areas, and in particular tax services. Although the accounting firm had significant expertise in accounting and tax matters, it was unlikely from the evidence that they had expertise in managing trust assets.

The Tax Court looked at the substance of the offshore structure and concluded that the trust was resident in Canada. Hence, it would be taxable on its worldwide income in Canada.

The details of offshore structures set up in the last 30 years warrant re-examination. Small details can trip up even the most sophisticated plans when courts move the goal posts.

…read the full article at The Ottawa Citizen Courts move offshore trust goal posts

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Filed under Barbados, Business & Banking, Offshore Investments