As a general rule, Canadian residents are subject to Canadian income tax on their worldwide incomes. This is true regardless of whether or not such income is remitted to Canada.

In order to prevent Canadians from deferring or avoiding tax on investment income by forming offshore trusts, there are complex rules in section 94 of the Income Tax Act (“the Act”) that generally come into play whenever a Canadian resident makes a “contribution” to an offshore trust. In general terms, such trusts are deemed to be resident in Canada for most purposes of the Act, and the Canadian “contributor” is jointly liable with the trust for any Canadian tax liability. Read More