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Canada To Amend Trust Tax

Thursday, March 4, 2010

Canadian Minister of Finance, Jim Flaherty last week announced his intention to propose amendments to the Income Tax Act that will be beneficial to employee life and health trusts.

“These proposed amendments will ensure that a fair and neutral tax regime applies to employee life and health trusts,” Flaherty said, making the announcement, adding: “The government of Canada remains committed to a fair and competitive tax system.”

The proposed amendments, which will apply to trusts established after 2009, would:

  • Create a new type of taxable trust in the Income Tax Act, an employee life and health trust;
  • Provide rules regarding the timing of deductions of any pre-funding of such a trust by an employer;
  • Allow the trust to deduct in computing its income all amounts paid from the trust to employees or retirees in respect of benefits, even if employees receive those amounts tax-free;
  • Provide rules governing the carryback and carryforward of any losses arising after the deduction of employee benefit payments by the trust;
  • Preserve the same tax treatment for employee benefits received from the trust as if they had been received directly from the employer (many types of health and welfare employment benefits are tax-exempt for employees under the existing income tax rules); and
  • Provide special rules applicable to employee life and health trusts whose beneficiaries include employee shareholders, highly compensated employees or related persons to ensure that the trusts do not offer unfair advantages to these individuals.

The government intends to introduce legislation in respect of these proposals at an early opportunity. The Department of Finance is seeking comment on the new proposals by April 30, 2010.

Amendments to regulations regarding withholding and reporting in relation to employee benefits paid by employee life and health trusts will be brought forward when the legislation is introduced.

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The Report

Offshore Trusts Guide: Introduction

The History of Offshore Trusts
Development of Professional Competence in the Jurisdictions
What Future for the Trust?
The New Age of Transparency
The Swiss Association of Trust Companies
The Society of Trusts and Estates Practitioners

Offshore Trusts Guide: Jurisdictions

Bahamas

Bahamas: Legal Framework and Formation Rules and Fees
Bahamas: 2006 Private Trust Companies Legislation

Barbados

Barbados: Legal Framework and Formation Rules and Fees
Barbados: Supervisory and Licensing Regime and Fees

Bermuda

Bermuda: Legal Framework and Formation Rules and Fees
Bermuda: Supervisory and Licensing Regime and Fees

British Virgin Islands

British Virgin Islands: Legal Framework and Formation Rules and Fees
British Virgin Islands: Special Trusts Act 2003
British Virgin Islands: The Trustee Act 2003
British Virgin Islands: :Supervisory and Licensing Regime and Fees
British Virgin Islands: New Laws on Private Trust Companies
British Virgin Islands: New Private Trust Company Regulations

Cayman Islands

Cayman Islands: Legal Framework and Formation Rules and Fees
Cayman Islands: Supervisory and Licensing Regime and Fees

Cook Islands

Cook Islands: Legal Framework and Formation Rules and Fees
Cook Islands: Supervisory and Licensing Regime and Fees

Cyprus

Cyprus: Legal Framework and Formation Rules and Fees
Cyprus: Supervision, Licensing and Tax

Gibraltar

Gibraltar: Legal Framework and Formation Rules and Fees
Gibraltar: Legislation, Regulation and Supervision

Guernsey

Guernsey: Legal Framework and Formation Rules and Fees
Guernsey: Trusts Law 2007

Isle of Man

Isle of Man: Legal Framework and Formation Rules and Fees
Isle of Man: Supervisory and Licensing Regime
Isle of Man: Uses Clients and Tax Treatment

Jersey

Jersey: Legal Framework and Formation Rules and Fees
Jersey: Supervisory and Licensing Regime
Jersey: Trusts Amendment Act 2006
Jersey: Foundations

Liechtenstein

Liechtenstein: Legal Framework and Formation Rules and Fees
Liechtenstein: Regulation Supervision and Transparency
Liechtenstein: Characteristics of Liechtenstein Trusts
Liechtenstein: Foundations

Madeira

Madeira: Legal Framework and Formation Rules and Fees

Malta

Malta: Legal Framework and Formation Rules and Fees
Malta: The Trust and Trustees Act 2004

Mauritius

Mauritius: Legal Framework and Formation Rules and Fees
Mauritius: Characteristics of the 2001 Trusts Act
Mauritius: Additional Provisions of the 2001 Trusts Act
Mauritius: Tax Treatment

Monaco

Monaco: Legal Framework and Formation Rules and Fees

Nevis

Nevis: Legal Framework and Formation Rules and Fees

Panama

Panama: Legal Framework and Formation Rules and Fees
Panama: Requirements for Acting as Trust Company in Panama

Seychelles

Seychelles: Legal Framework and Formation Rules and Fees

Turks & Caicos

Turks & Caicos: Legal Framework and Formation Rules and Fees
Turks & Caicos: The Voidable Dispositions Ordinance

Vanuatu

Vanuatu Legal Framework and Formation Rules and Fees




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