Word Of Caution: There are continual rumors that the Self-Employed category will be eliminated in the future. Those applicants who may fall into this category are advised to move swiftly before the door closes.

Business Immigration Program

Canada’s Business Immigration Program’s main objective is to encourage and facilitate the immigration of experienced business people. In order to make a successful application under the Business Immigration Program, an applicant must demonstrate that they possess certain asset levels and business experience. The two categories available under the Business Immigration Program are the Entrepreneur and the Investor.

Entrepreneur Category

An Entrepreneur applicant is someone who has the ability to establish, purchase, or make a substantial investment in a business venture in Canada. This venture, which the person will manage on an active basis, must result in the creation or maintenance of employment for one or more Canadians. The Entrepreneur category accommodates experienced business people whose background is oriented towards the management of small to medium sized business ventures. Although neither the Act nor the Regulations stipulate exact business investment capital amounts, a minimum net worth of $250,000 USD is usually required to qualify as an Entrepreneur. The bulk of this net worth must be easily transferable to Canada, as a minimum of $150,000 to $200,000 USD is required to provide for capital for the business venture.

In the past, some Entrepreneur applicants who made their investment prior to landing received unconditional visas. It is now the policy of Canadian Immigration officials to apply the "terms and conditions" mentioned previously to all Entrepreneurs (and accompanying dependants). These terms and conditions must be met within two years of arriving in Canada. Entrepreneur Applicants also have the additional condition of continually reporting to officials during the two year period. Conditional visas are designed to provide all Entrepreneur applicants a chance to establish in Canada and to consider a number of investments. Once an Entrepreneur applicant has fulfilled the terms and conditions, he may then apply to have them removed. However, if the terms and conditions are not met, the Entrepreneur applicant and his family may be stripped of their Permanent Residence status and deported. The Entrepreneur condition to be "full-time actively managing only the Canadian business" may be unattractive to applicants who wish to spend a significant amount of time outside of Canada.

Investor Category

The Investor category is designed for the high net worth businessperson who wishes to invest in a larger business venture but is prepared to rely on others to oversee his investment. The Investor category allows for an investment by a businessperson who possesses a net worth of approximately $500,000 USD and makes a substantial investment in an approved project. While the minimum investment period is five years, the minimum investment amount is approximately $250,000 USD.

The actual out-of-pocket investment may be reduced to $70,000 USD by using available financing options. An Investor applicant does not need to live in the province in which he makes his investment. Nor does he need to become actively involved in the management of the business venture to be issued an unconditional Permanent Resident Visa. This avoids any problems associated with "terms and conditions".

Once permanent residence is secured, then an immigrant can apply for naturalized Canadian citizenship after three years of residence.

Canadian Tax Issues During and After Three Year Naturalization Period

Tax planning for new Permanent Residents is often a critical part of the process. If appropriate steps are taken, the impact of Canadian taxation can be legally minimized or effectively eliminated. The two fundamental concepts basic to Canadian tax planning are as follows:

(a) Canada taxes its residents on their world-wide income using Canadian Income tax rules and rates. Canada does not tax Canadian Citizens if they are not resident in Canada.

(b) Canada taxes non-residents of Canada (including Canadian Citizens who are not resident in Canada) only on:

(i) any employment income earned in Canada;

(ii) any business income earned from carrying on a business in Canada;

(iii) capital gains primarily attributable to Canadian real estate and shares in private Canadian companies; and

(iv) certain types of Canadian source investment income such as interest, rents, dividends and royalties. This is done by the imposition of a withholding tax at a statutory rate of twenty-five percent which may be reduced under applicable income tax agreements.

A Canadian citizen who departs Canada and becomes a "non-resident" for tax purposes will no longer be subject to Canadian taxation other than as described above. Neither the Canadian federal government or any of its provincial governments impose any estate taxes or succession duties on death.

The income tax imposed on Canadian taxpayers is computed at a personal level. The Income Tax Act (Canada) provides for all the usual deductions and credits recognized in most industrial countries. Business losses and carry forwards are allowed in calculating "taxable income". Once taxable income has been determined, the "marginal tax rate" will apply. The tax rates are progressive with maximum rates varying from province to province. Capital gains are taxed at only seventy-five percent of full rates and dividends received from Canadian corporations by individuals receive favorable treatment. However, the maximum combined federal-provincial personal income tax rates generally range from fifty percent to fifty-eight percent depending on the province of residence at the end of the calendar year.

The Income Tax Act does allow an immigrant to shelter non-Canadian source income and capital gain for a period of up to sixty months after their arrival in Canada. The sixty-month period commences on January 1 of the calendar year during which the taxpayer becomes resident in Canada for tax purposes. Typically, income/capital gain-producing assets that are situated outside of Canada are transferred into an "offshore trust". A non-resident financial institution is used as trustee. All income and capital gains attributable to such assets that are earned by the trust, escape Canadian tax during the period that the individual is a Permanent Resident of Canada and is in the qualification period of Canadian Citizenship. This "tax holiday" expires at the end of the sixty month period. If the trust continues in place thereafter and the person remains resident in Canada for tax purposes, the trust itself will become a resident taxpayer and liable for Canadian taxation on its world-wide income.

If, however, the Permanent Resident obtains Canadian Citizenship within the five year tax holiday window and then departs Canada after obtaining Canadian Citizenship, the income and capital gain produced by the offshore trust will never be taxed by the Canadian government. Those who choose to remain resident in Canada as Canadian residents and citizens beyond the five year period, may choose to reacquire the assets from the offshore trust at that point for a "stepped up" tax basis. They will then have a new basis equal to the fair market value of the assets at the end of the five year period. In addition, they may wish to explore one of several other strategies to extend the "tax holiday" period.

In conclusion, Canada is a very attractive destination. One must be aware that it is a potentially high tax country where improper or absent tax advice can result in high world-wide tax liability. As Canadian Immigration officials are neither qualified nor obligated to provide you with any advice relating to the structuring of your financial or tax affairs I recommend that you receive proper written legal advice. Along with tax structuring, this advice should also set out your ability to qualify for residence, and help you set up a strategy to ensure that you maintain your permanent residence and qualify for citizenship. If properly done, establishing residence and domicile in Canada may be a more appropriate solution for a client who for business or family reasons cannot live in an island tax haven. It is not just for clean air, mountains and efficiency that Canada can be called "The Switzerland of the North".