# How are offshore capital gains taxed?



## Stefon (Apr 3, 2011)

In Canada you are taxed on 50% of your capital gains.
What if I put my money into an offshore bank account such as in Cayman Islands. I can still invest, however Cayman Islands does not tax on capital gains. So logically I can make more money than if I kept my money in Canada.

So what I am wondering, is since CRA taxes on world income, how would they know what I have offsore, since there is no way for them to find out?


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## Square Root (Jan 30, 2010)

Stefon said:


> In Canada you are taxed on 50% of your capital gains.
> What if I put my money into an offshore bank account such as in Cayman Islands. I can still invest, however Cayman Islands does not tax on capital gains. So logically I can make more money than if I kept my money in Canada.
> 
> So what I am wondering, is since CRA taxes on world income, how would they know what I have offsore, since there is no way for them to find out?


You should be careful. Tax fraud is a serious offence. There are a lot of people who got caught doing this when the Swiss banks they used had to disclose the accounts to tax authorities in Germany US and Canada (among others). Really not worth the risk.


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## TomF (Jul 26, 2011)

Stefon said:


> . . .
> So what I am wondering, is since CRA taxes on world income, how would they know what I have offsore, since there is no way for them to find out?


You are correct, there should be no way for them to find out. So don't go around broadcasting the fact you have an offshore account (_if_ you do).

In fact, even if they did find out, the amount involved might be too small for them to bother about. Off the top of my head, from the CRA tax forms, I think you are supposed to declare anything offshore worth over $100,000. This requirement was added around 1997, when Hong Kong was about to be transferred back to China. At the time, I thought it was a sleazy attempt to shake money out of all the Chinese who were emigrating to Canada at the time. Maybe it was just a coincidence. In any case, for smaller amounts, I wouldn't worry about it too much. _Some_ of the larger Swiss banks were recently forced by a lawsuit to reveal some of their offshore account holders. The rest of the Swiss banks were not. Plus that leaves banks in the Caribbean, the Cook Islands, Austria, Lichtenstein, and many others.

There is a book available that might interest you:

"Take Your Money and Run"
by Alex Doulis

He covers several aspects of getting your money out of Canada to avoid the high levels of taxation.

Also, Diane Francis, an editor at The National Post has written several articles, and some blog posts, on the topic of Canadian money going offshore. Here are a couple:

Canadian tax dodgers: Part I

Canadian tax dodgers: Part II

In fact, I seem to recall (but can't find it now) somebody posting a comment on her blog that he had opened an account in the Cayman Islands, but didn't think a small amount like $3000 would be of much interest to Revenue Canada.

Personally, I think it is a good idea to have an offshore bank account; you don't want to keep all your eggs in one basket. And there are many other reasons for doing so too.


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## andrewf (Mar 1, 2010)

One wonders how worthwhile it is to go to the trouble of evading taxes on relatively small amounts. The risk/reward doesn't seem to be there to justify it.


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## humble_pie (Jun 7, 2009)

there are plenty of ways for them to find out.

one of the loveliest awaits offshorers who have, alas, recently departed this earth.

canadian heirs then try to claim the offshore account.

offshore jurisdiction demands the death clearance & other documentation from the jurisdiction in which the dearly departed did, in fact, expire. Where he did, in fact, reside & pay taxes, or at least some of them.

now the heirs are really hexed. If they go to pappy's tax jurisdiction to get clearance for the offshore assets, the cat'll be out of the bag, ie dear old Pa had hidden a few things. Oops. If they don't go to the tax jurisdiction, the offshore bank will end up not recognizing the heirs but instead holding everything forever. This will be oops on the instalment plan.


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## TomF (Jul 26, 2011)

andrewf said:


> One wonders how worthwhile it is to go to the trouble of evading taxes on relatively small amounts. The risk/reward doesn't seem to be there to justify it.


True.
But for small amounts, you wouldn't really be evading taxes anyhow. I mean, let's say you pay your taxes honestly every year and manage to save up some cash. What you do with your money after that is your business--nobody else's. Let's say you then take your cash (say, $3000) and you put it in an offshore bank. On $3000 you might make only a few pennies in interest a year--hardly tax evasion. For small amounts, I think the prime motive for having an offshore account is security, treat it like a rainy-day fund. Perhaps consider it protection against complete bankruptcy, a divorce settlement, a sleazy business partner, a frivolous lawsuit, etc.



humble_pie said:


> there are plenty of ways for them to find out.
> 
> one of the loveliest awaits offshorers who have, alas, recently departed this earth.
> . . .


I have been reading some forms from offshore banks, and when you open an account, you name your beneficiary (or beneficiaries). The process seems quite simple. Government doesn't even get involved (at least not on their end, which is as it should be).

I suppose a person could visit the bank in person every year or so and have a co-signer if necessary. Then if one person dies, the beneficiary could easily access the account. Wouldn't even have to bring the money into Canada. Work a visit to the bank into their travel plans, withdraw some money every now and then and have a good trip around the world every couple years.


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## OhGreatGuru (May 24, 2009)

TomF said:


> True.
> But for small amounts, you wouldn't really be evading taxes anyhow. I mean, let's say you pay your taxes honestly every year and manage to save up some cash. What you do with your money after that is your business--nobody else's. Let's say you then take your cash (say, $3000) and you put it in an offshore bank. On $3000 you might make only a few pennies in interest a year--hardly tax evasion. For small amounts, I think the prime motive for having an offshore account is security, treat it like a rainy-day fund. Perhaps consider it protection against complete bankruptcy, a divorce settlement, a sleazy business partner, a frivolous lawsuit, etc.


Bullroar. 
1. If you generate income with that cash, it is the government's, and by extension all other taxpayers', business.
2. People don't set up offshore accounts for a measly $3K. So your example is unrealisitic. You could "make a few pennies" in interest with a Canadian account and also not report it, since financial institutions don't issue T3's for small amounts.
3. Security? Give me a break. Hiding assets from a bankruptcy or divorce settlement are just as illegal as tax evasion. Your "sleazy business partner" will probably know all about your hidden assets, and you will be afraid to report him when he steals them, because you don't want the authorities to know about them. You're actually setting yourself up as a pigeon. Frivolous lawsuit? If the lawsuit is frivolous your assets aren't in jeopardy. 
4. The prime motive for an off-shore account is not security, it is evasion of taxes or just debts.


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## humble_pie (Jun 7, 2009)

guru is right, of course.

as for those forms naming your beneficiaries, a body can sign those forms until he's blue in the face. But the bank is going to demand death certificates, copies of wills & clearance/release documentation from the jurisdiction in which Pappy died regardless.

because otherwise, if the bank does not, there will be far too many slippery relatives showing up at the bank's door & saying Pappy Died last Week now Gimme my Money.


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## CanadianCapitalist (Mar 31, 2009)

TomF said:


> I mean, let's say you pay your taxes honestly every year and manage to save up some cash. What you do with your money after that is your business--nobody else's.


That's an interesting take. You mean to say that all those taxpayers ponying up for taxes on dividends and interest and capital gains on investments made with after-tax money in Canada are suckers?


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## Plugging Along (Jan 3, 2011)

It really makes me wonder why people are going through so much trouble to not pay tax. 

Its one thing to minimize your taxes through any LEGAL means possible, I expect that everyone should try that.

It's another thing to come up with questionable or out right illegal schemes to save a few pennies. If we're talking about such small amounts, is it worth it. If it's really large amounts, then first, they probably should be getting professional advice, and secondly, if they have that much money, then paying a little tax wont hurt them that much.

If you're going to try and pull a fast one, at least make it worth your while. Do it for enough money that you would never have to work again, forget about the cents.


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