# Equity Fund based in B.V.I. tax advice please.



## Banalanal (Mar 28, 2011)

Can one of the knowledgeable tax advice posters please comment on how an equity fund, focused on Asia and incorporated in the British Virgin Isles, would be treated at tax time by the CRA? The fund legally does not pay capital gains or dividend taxes in the country it invests in. Would the position only be declared if a stakeholder sold a position (i.e. only report the holding of shares in the fund when capital gains or losses have been realized) or dividends were received?


Thanks for the help.


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## Guban (Jul 5, 2011)

Banalanal said:


> Can one of the knowledgeable tax advice posters please comment on how an equity fund, focused on Asia and incorporated in the British Virgin Isles, would be treated at tax time by the CRA? The fund legally does not pay capital gains or dividend taxes in the country it invests in. Would the position only be declared if a stakeholder sold a position (i.e. only report the holding of shares in the fund when capital gains or losses have been realized) or dividends were received?


I'm surprised that there is no taxes paid to the Asian corporations upon the fund realizing capital gains or collecting dividends. Seems odd, but possible depending on the various tax treaties with BVI.

As Canadian residents, we need to declare world-wide income, so any dividends would have to be declared when received. You may have to file a T1135 too. Not planning on hiding money offsoure, are you? :friendly_wink:


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## Banalanal (Mar 28, 2011)

Thanks. It's a hedge fund with an excellent 20 year track record. Thinking of investing. Curious about the tax implications.


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## Banalanal (Mar 28, 2011)

I know there are changes coming to Canadian tax legislation regarding funds held offshore but having funds in an investment company based offshore isn't illegal or seen as fraudulent or suspicious is it?


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## Guban (Jul 5, 2011)

Banalanal said:


> I know there are changes coming to Canadian tax legislation regarding funds held offshore but having funds in an investment company based offshore isn't illegal or seen as fraudulent or suspicious is it?


Having money offshore is certainly not illegal, but not declaring it may be and not declaring the income certainly is. There are legitimate reasons for investing offshore. See:
http://www.cbc.ca/news/business/taxseason/story/2012/04/02/f-taxseason-tax-havens.html

What changes in offshore tax legislation have you heard about?


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## Banalanal (Mar 28, 2011)

Thanks for the reply and link. I was wrong about there being changes. Thought I had heard something in the news.


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