Tax Benefits For Canadians Living in the Bahamas

The Bahamas is a good base for investing in Canada and the outside world, according to an article in the 2001 Bahamas handbook by H. Heward Stikeman, OC, QC, LLD, BCL, DS and Paul J. Setlakwe, M. Fisc., BCL, BA. Increased investment outside Canada, exports by Canadian firms and the growing number of multinational families have increased the scope for the Bahamas as a center for international activity.

As an individual Canadian you are taxed on your world wide income if you are a resident of Canada. If you are a non-resident of Canada you are only taxed on the income you earn which is directly related to Canadian non-residency. An individual might like to become a resident of the Bahamas, in the Bahamas at the time of writing this article there is no tax on income earned in the Bahamas. If you receive income as a result of activities carried on in the Bahamas you will not be subject to tax in Canada, as long as you are not considered a Canadian resident.

The income tax act specifies the rules for what determines a resident and non-resident. Each individual situation can vary so it is always good advice to get an opinion from a qualified Canadian tax lawyer or tax expert. Once an individual has followed the rules for changing from a resident to a non-resident of Canada, for tax purposes ( this does not mean giving up citizenship ) then the rules for non-residents applies.

Lets take an example. Suppose you as an individual wanted to live in the Bahamas and make it your residence but you still wanted to work in Canada or carry on a business in Canada during part of the year. Just as an example, you might work 180 days during the warmer months and return to the Bahamas during the winter months. First you would get legal and tax advice on the deemed disposition of your assets. In Canada when you no longer maintain a permanent presence here you are considered a non-resident. So a good tax account will determine what your final tax liability to Canada will be and let you know how much of those assets you can move to the Bahamas. Now your personal residence could be sold and it would not trigger any tax. 

Certain other assets you may have might not be subject to tax or they may be subject to the lesser tax rate of capital gains which at the time of writing is 50% of the adjusted cost base and the fair market value on deemed disposal. That is, you can take your money and move it to the Bahamas which has a good reputation for banking and investing. Now that your money is in the Bahamas and you are no longer a Canadian resident you will only be taxed on the amount that you earn in Canada. 

The income you earn from investments in the Bahamas in tax free because there is no tax in the Bahamas. Go live in the Bahamas for 6 months during the winter and then return to Canada as a non-resident in the summer months. Invest some money here, start a business or take a job and you will only pay tax on the income you earn from those activities. You do not report income you may be earning as a result of investing in the Bahamas. At the end of the summer return to your residence in the Bahamas with your after Canadian tax income earned during the summer. Invest it in the Bahamas and it will earn income tax free.

If this sounds good to you, your first step to owing a dream home in a tropical paradise is just a call away to a good tax accountant. Make sure they have an expertise in the area of non-residency and residency taxation. Now for those individuals who may be owners of Corporations, the benefits can be more advantages. If you want the opportunity of living in the Bahamas see your tax accountant and start planning for a sun filled future in the Bahamas.