Immigrating to Canada from a Tax Perspective
By Allan Garber
Parker, Garber & Chesney LLP
www.parkergarberchesney.com
Canada has consistently been on the various lists produced annually as one of the best countries to live in
from the point of view of political stability, education, health care, religious and social freedoms but one
area often overlooked are the business opportunities and the tax implications for immigrating to Canada and
setting up business in Canada.
Canada is made up of ten provinces and two territories covering almost 10 million square kilometres making
it the second largest country in the world after Russia and larger than the 14 largest European countries
put together but has a population of less than 34 million working out to less than 3.5 people per square kilometre.
Immigrants to Canada have the ability to defer tax on the income from assets being brought into the
country for a period of 60 months. This allows immigrants to set up what is commonly referred to as
an “immigration trust” for the 60 month period and that all income earned by the trust during that
period will not be taxed in Canada even if it is brought into the country. In addition, Canada is not
interested in taxing assets brought into the country by immigrants so the tax regime allows immigrants
to recognize a “step up” in the cost base of assets held by the immigrant at the time the enter the country.
Therefore, Canada will only tax the capital gain on the disposition of assets based on the appreciation of
the asset for the period the taxpayer was resident in Canada.
As most countries other than the United States, Canada does not tax citizenship but does tax based on
residency or, in the case of a non-resident, only if the income is Canadian-source. In an effort to
reduce double-taxation Canada has tax treaties in force with 87 countries, another 8 signed but not
yet in force and another 14 under negotiation.
Canadian personal tax rates depend on the province of residence and calculated on a progressive system
of increasing rates at published levels of taxable income. The highest marginal rate ranges are as follows:
Interest and regular income 39% to 48.22% Capital gains 19.5% to 25% Dividends 15.88% to 39.66%
Only one half of capital gains are taxed and dividends from Canadian public companies and investment
holdings are taxed at reduced rates.
Canada has no estate or gift tax although there are special rules for gifts to spouses and
minor children. Upon death, the deceased is deemed to have sold all assets at fair market value
and the gain, if any, is taxed at capital gain rates. The estate or beneficiary would then have
a cost base established by the deemed disposition. Assets left to a spouse or spousal trust are
not taxed until the death of the surviving spouse. Canada treats common-law spouses and same-sex
spouses equally with traditionally married spouses as same-sex marriages are legal in Canada.
Each province and territory has a probate fee regime which range from 0.16% to 1.5% of estate at the highest values.
Corporate tax rates for are very competitive and range as follows:
Canadian small business 11.92% to 19% Manufacturing 20.5% to 34% General income 28% to 34%
Small business rates apply to the first $500,000 per year and manufacturing rates apply to amounts over $500,000.
As you can see Canada offers great potential for immigrants and business.
