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Canada To Close Property Tax Loophole

Wednesday, October 5, 2016

Canadian Finance Minister Bill Morneau has announced that he will close loopholes surrounding the capital gains tax (CGT) exemption on the sale of a principal residence.

According to the Finance Department, the Government "is committed to tax fairness, and to ensuring that the exemption from capital gains tax on the sale of a principal residence is available only in appropriate cases."

Last month, the Canada Revenue Agency (CRA) announced that it would investigate reports that real estate speculators are manipulating loopholes in the property residence rules to evade taxes. The move followed a report by the Globe and Mail that claimed that "a network of speculators flips homes for a profit and evades taxes by classifying them as principal residences even though they never lived there."

The CGT exemption is intended to be available only to Canadian resident individuals and trusts, and families are only permitted to designate one property as their principal residence for any given year.

Under the changes, an individual who was not resident in Canada in the year they acquired a residence will not be able to claim the exemption for that year. This measure applies to the disposal of properties after October 2, 2016. The aim is to ensure that permanent non-residents are not eligible for the exemption on any part of a gain from the disposal of a residence.

In addition, trusts will be eligible to designate a property as a principal residence for a tax year that begins after 2016 only if additional eligibly criteria are met.

A trust will be required to be – in each year that begins after 2016 for which the designation applies – a spousal or common-law trust, an alter egotrust, a qualifying disability trust, or a trust for the benefit of a minor child of deceased parents. The trust's beneficiary who, or whose family member, occupies the residence for the year will be required to be resident in Canada and to be a family member of the individual who creates the trust. Transitional relief will be provided for affected trusts for property owned at the end of 2016 and disposed of after 2016.

For tax years that end after October 2, 2016, the CRA will require taxpayers to report the disposal of a property for which the principal residence exemption is claimed. The Government has also proposed providing the CRA with new assessment powers in cases where the disposal is not properly reported in a taxpayer's return.

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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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