The True North Strong

Booming Economy, growing metropolises, cultural offering without end. Canada is one of the quickest growing countries worldwide in terms of economy, popularity, and much more. Its citizens are welcomed worldwide, as shown by the fact that it is one of the most liked countries in the world according to WorldAtlas. It is famous for its aboriginal history, its massive nature and the Rocky Mountains, as well as its famous metropolises like Toronto and Montreal.

• Most Loved Country in the World

Is Canada a Good Place to Live?

In its ranking of the most livable cities in the World, Canada has three cities in the top 10 (#5 Calgary, #6 Vancouver, #7 Toronto). Ahead of popular neighbour New York. More than any other country. Much more than this though, it also ranks high in other statistics. Its education system is considered among the best in the world, its cities are becoming increasingly new tech, and modern oriented. Meanwhile it is also one of the most multicultural and globalized countries worldwide, often considered a leading example for good integration. Which may be part of the reason its citizenship offers one of the most powerful passports worldwide. In regards to future-orientation, Vancouver and Montreal are regularly ranked as some of the best cities for green transportation.

• Three of the Ten Most Livable Cities
• Best Cities for Green Transportation

Canada’s Nature

Canada’s nature is unparalleled worldwide, and people from all over the world know to appreciate its vast expanses of untouched nature. The rocky mountains offer some of the best skiing in the world, Banff is a regal mountain town surrounded by the wild, and the luxury hotel fairmont Lake Louise is found on postcards on fridges all over. Below a peak at what western Canada’s riches include.

What about the Hard Facts?

Canada is home to 38 mil. inhabitants. With 9,984,670 km2 it is the second largest country in the world, yet also one of the most sparsely populated. This area is divided into provinces or territories (the equivalents to USA’s states). Due to the colonial past, the official languages are English and French, with French being commonly spoken only in the large eastern province of Quebec. It is also comfortably a part of the G7 summit every year, and counts to one of the most powerful political countries in the world. In terms of culture and traditions, Canada (at least the anglophone part) is very similar to its southern neighbours the USA. Its capital Ottawa is only the fourth largest city in the country, following (in order):

• Toronto – 2,93 mil.
• Montreal – 1,78 mil.
• Calgary – 1,02 mil.

No More Oil – The Canadian Economy

Canada has strongly de-oriented from its former oil-based economy. Despite this, its economy is still growing (see below), with 1,9% GDP growth in 2018. Its GDP of xx means it is the 10th largest economy worldwide. According to forecasts by Canada’s largest banks, Canada’s economy is set grow at an annualized rate of 36% in the third quarter of 2019. This is compared to 20% for the United States. In fact, it is easy to draw comparisons to the USA due to its market-oriented economic system. Leading sectors include the automotive and other industries, forest products, minerals and petroleum. This is also reflected in its largest trading partner is the United States, with the country receiving some 75% of Canada’s exports.

Of the state’s total income, taxes make up 32.2%. This is made up partially of income and corporate tax. Federally, these rates are 33% and 15% respectively. Yet these differ with respect to provinces, where each province has their own tax rates. Lastly, they are also staggered, with higher income corresponding to higher tax rates.

• Federal Corporation Tax: 33%
• Federal Income Tax: 15%

Taxes in Canada – Explained

Taxes in Canada are quite simple to understand, but often misunderstood. They are said to be very high, but this is not necessarily the case. The tax system in Canada is very much unlike its southern neighbours, of the U.S.A.

You want to learn more about how real estate taxes work in the U.S.A.?

• All Taxes when Buying a House

Income Tax

Income tax is levied by the state as well as by the individual provinces. The individual provinces have different tax rates. Therefore, as in the U.S., where state and county tax the same items, Canada also has e.g. federal and provincial income taxes. However, the federal share is the largest share. The structure of Canada’s income tax is in several stages. The federal tax rates are approximately 15-29%. The top tax rate of 29% starts with an income above CAD128,800. In addition, there are a few percentage points of provincial taxes. In addition to income tax, some provinces levy other taxes on wages and salaries, such as Medicare.

• Federal Income Tax: 15-29%

Goods-and-Services Tax

Regarding VAT (value-added-tax), there is again the dual system of the federal tax (GST) and a provincial tax (PST). It is due, for example, on the sale of goods and real estate as well as on services. The federal government levies 6% VAT and the individual provinces can levy up to an additional 6%. Residents of Vancouver, in British Columbia, for example, will be charged an additional 6%, while in Calgary, Alberta there is none.

• Federal VAT: 6%

Wealth Tax, Inheritance Tax, etc.

Investors will also be pleased to hear: Canada has no wealth tax, no inheritance or gift tax, and no church tax.

• No Wealth Taxes
• No Inheritance Taxes

Booming Business – Canadian Real Estate

Canada’s rapid economic growth is down to large decreases in unemployment and high spending, but largely housing and real estate sales.

Overview of Real Estate Market

Ottawa, with healthy economy, population growth, attractive labor market and strong demand for condominiums, has developed into a dynamic Canadian housing market. Toronto and Montréal remain classic sales markets. In eastern Ontario and Quebéc, property prices continue to rise and British Columbia is expected to stabilize.

Someone who moves to Canada after selling their house in countries with higher real estate prices can often purchase houses with a significantly reduced mortgage. With the exception of the metropolitan areas, rental housing in Canada is relatively inexpensive. The average price per square meter to buy an apartment in a city centre is CAD5.921, with outside the city costing CAD4.090.

House Prices – List

The median house price gives a good indication of how expensive and luxurious properties are in cities. When taking these in proportion to the median income, one arrives at a factor indicating how strong the market is, and how affordable property is for people working normal jobs in the city. The higher the factor, the more difficult it is to buy a house with a normal income. Below are selected cities, with median house price, and the factor.

• Toronto: 686.000 – Factor 8.3
• Edmonton: 353.000 – Factor 3.6
• Montreal: 306.000 – Factor 4.6
• Vancouver: 942.000 – Factor 12.6
• Winnipeg: 279.000 – Factor 3.7
• Halifax: 261.000 – Factor 3.5

What about Taxes on Real Estate?

To invest in property, you do not have to be a Canadian citizen or even live in the country, and property taxes and interest expenses are tax deductible. Property taxes are at 1% on CAD200.000, and 2% on average. Also note, different from U.S. taxes, Canadian real estate is subject to the goods and services tax. It is important to be aware of the tax implications for all phases of the investment though, from owning the property, to living in or renting it, to selling it.

The real estate transfer tax, which applies to real estate purchases, is not regulated uniformly throughout Canada, with individual provinces again deciding their own rates. It is between 0.5% and 2% and depends on the purchase price of the property. Some provinces do not levy any tax at all.

• Property Tax: 2%
• Transfer Tax: .5%-2%

The Key Details

Houses in Canada are built in a simpler way than e.g. traditional Central European houses. The power supply in the houses is generally designed for 110 volts. Internet is available practically throughout the country, including in rural areas, via telephone line, fiber optics or satellite. The average Canadian spends CAD53 on water utilities a month, using 25 cubic meters of water. This translates to CAD2.12 per cubic meter of water utility.

• CAD53 a month for water

Economy in Canada – Graph

Below a graph of the two main Canadian Stock Exchanges, S&P/TSX.

One Year

Three years

Banking in Paradise: The Top Havens for Offshore Banking

It is impossible to know anything exact about tax havens or tax avoidance. Because all these numbers take place in the dark and are undocumented, there is no way to know for sure. But it is estimated that e.g. England loses €12,5bn (£11,4bn) a year, and this is not decreasing. In 2013 at €14,30bn (£13bn) pounds, it increased by 5,0% to €14,96bn (£13,6bn) in 2017. Individuals and businesses can potentially benefit from low or zero taxes on income earned abroad, where loopholes, credits or other special tax considerations are allowed. For real estate taxes we have you covered

• Saving with US Tax Deductions

In the USA, the Tax Cuts and Jobs Act (TCJA), which was passed in December 2017, set the effective corporate income tax rate of U.S. taxes at 21%. Companies known in the past for their offshore operations in tax havens include Apple, Microsoft, Alphabet, Cisco and Oracle. Overall, tax havens can also offer advantages in the area of lending, as it can be cheaper for companies to borrow internationally. A conservative estimate assumes that $21 trillion are located in tax havens, 9.8 trillion of the world’s top 100,000 wealthy people alone.

• 5% increase in tax avoidance
• $21 trillion are located in tax havens
• Apple, Microsoft, Oracle all used tax havens

What is a Tax Haven?

A tax haven is a State or territory that has no, or particularly low, taxes on income or assets. Theseare therefore attractive as a place of residence for individuals or as a business location. Common to all of them is the goal of not having to pay tax on income earned in high-tax countries. Legal certainty and political stability are important for a tax haven, as they guarantee the security of the capital invested. Good governance (i.e., efficient administrative structures and low corruption) and low tax rates have a decisive influence on the likelihood of inflows of money. Banking secrecy can be part of the legal framework. Secrecy, as well as possible loopholes all work to make some regions hotspots for tax avoidance.

What are the U.S. Tax Havens?

In the USA, taxes are quite strongly regulated. Although many go to Miami in their old age, Florida taxes are actually not that low, meaning their assets are usually stored elsewhere. The rich and famous also like New York, but even here, high income tax means you will have a hard time with reducing your tax sheet.

Our full overview of U.S. property tax rates:

• U.S. Property Tax Rates – List

How many Tax Havens are There?

In an investigation, finance ministers and experts of the European Union identified 17 countries as official tax havens. Furthermore, 47 states landed on a “grey list”, have also promised more transparency and a few reforms and are therefore under closer scrutiny. There are many lists such as

Are Tax Havens Illegal?

No. Many individuals with high income become residents of tax havens in order to pay less income taxes. This is not illegal. Although, some corporations funnel their income through shell corporations which are headquartered in tax havens such as Bahamas or Malta. This is illegal, because these companies are falsely reporting their income as less than what it is. For this reason, a main part of a tax haven country is that it acts secretly and does not reveal information to investigators from abroad.

Income Tax Rate for Different Countries – Comparison

Different countries have different income tax rates. Personal income taxes are taxes that a person pays when they report income such as salary, wages, or any other form of income. The highest income tax in the world is in the Ivory Coast, with an average personal income tax of 60%. In tax havens such as the Bahamas or the UAE, personal income tax is 0%. Below are some selected countries and their income taxes. There are other methods to reduce your personal income tax, such as those used by Donald Trump.

• Ivory Coast – 60%
• Germany – 45%
• United Kingdom – 45%
• USA – 21%
• Bahamas, UAE, Cayman Islands, etc.- 0%

Corporate Tax Rates for Different Countries – Comparison

Corporate Tax is a tax based on the income of a coporation. To reduce this, many companies invest their profit directly back into the company, or move their headquarters to a tax haven. Tax havens have very low corporate tax rates, meaning companies which report income when headquartered here pay less taxes than they would otherwise. The highest coporate tax rate in the world is in Puerto Rico, 37,5%. The lowest corporate tax rate, and top tax havens are the Isle of Man, UAE, Bahamas, and Bermuda, all with 0% corporate tax.

• Puerto Rico – 37,5%
• Germany – 30%
• USA – 21%
• United Kingdom – 19%
• Bermuda, Cayman Islands, etc. – 0%

List – Top Tax Havens Worldwide

Tax Havens can be countries, e.g. Panama, the Netherlands and Malta. Others are regions like the Isle of Man, Jersey, Delaware, or the Cayman Islands. Everyone from the Queen of England, ex-presidents and criminals use tax havens to minimize the taxes they pay.

The Cayman Islands – Caribbean Paradise

A seaside hut in the Cayman Islands.

Palms, clear blue water, and luxury non-stop. Officially a British territory, the Cayman islands are perhaps the most famous tax haven in the world. Here it is possible for a corporation to be formed and retain assets without paying any tax. Neither income, profit, inheritance, etc. are taxed here. 40 of the world’s largest banks and 40% of the world’s hedge funds are based in the Cayman Islands. Companies from Wells-Farrgo to Pepsi all use the uniquely advantageous loophole present here.

• GDP: $3.84 Bn
• Population: 63k
• Secrecy Rank (FSI): 3
• Corporate tax: 0%
• Income Tax: 0%

The Cayman Islands are situated just south of Cuba in Central America

The largest and most populous island, famous for its sea turtles and beaches, is Grand Cayman.

Malta – Mediterranean Money

An oceanfront in the mediterranean island Malta.

Malta is arguably Europe’s top tax haven. Which also means many investigations and public pressure. At the moment though, Malta is still a top destination for tax avoidance. Why? Malta has relatively high income tax and corporate tax… But Malta has a tax system in which companies pay the lowest profit tax (differenet from corporate tax) in the EU. Additionally, when applying for it, 30% of corporate tax can be reduced.

• GDP: $11,00 Bn
• Population: 441k
• Secrecy Rank (FSI): 20
• Corporate tax: 35,0%
• Income Tax: 33,8%

Malta is a tiny island between Sicily and North Africa.

It is famous, among other things, for its beaches.

Ireland – Gold at the End of the Rainbow

A golden sunset on the Irish coast.

Ireland is often referred to as a tax haven, although Irish officials assure that their country is not one. Liz Nelson, Director of the Tax Justice Network, says: “Ireland allows for the shifting of profits, like some other jurisdictions,” Nelson told DW. “This is how a network of secrecy has been created,”. The tech-giant Apple, through its international subsidiaries has recorded more than $180 billion in offshore profits in Ireland, evading $59.2 billion in U.S. taxes. More than a quarter of the Fortune 500 companies have subsidiaries in Ireland.

• GDP: $11,00 Bn
• Population: 4,95mio
• Secrecy Rank (FSI): 26
• Corporate tax: 35,0%
• Income Tax: 48,0%

Ireland is home to breathtaking landscapes in its highlands.

The Bahamas – Prototype Paradise

A view of the Bahamas from space.

The Bahamas have no capital gains tax, inheritance tax, income tax or gift tax. Additionally, there is high banking secrecy, and tax evasion is not considered a criminal offense.. U.S. companies reported profits of $10 billion to Bahamian subsidiaries in 2010, 123% of the country’s own GDP. Wells Fargo Bank and utility AES are a few of the 5% of Fortune 500 companies with subsidiaries in the Bahamas. At times, there were about 400 banks in the Bahamas. All this may also change however, as the country signed an agreement to exchange information and cooperate with foreign countries’ tax authorities.

• GDP: $11,26 Bn
• Population: 394k
• Secrecy Rank (FSI): 19
• Corporate tax: 0%
• Income Tax: 0%

Situated just east of Florida, and North of Cuba, this is a Caribbean paradise.

Exuma Beach in the Bahamas is world-famous, and its clear blue waters and white sand uncomparable.

Luxembourg – Medieval Money Maker

A street in Luxembourg.

If there is a tax haven with the greatest international renown besides Switzerland, it’s Luxembourg. Her some companies have a tax rate of 1% or less. This is all not on paper, and only revealed in the “Luxembourg leaks” in 2014. It is common for companies like Deutsche Bank to move their profits to Luxembourg disguised as interest and pay virtually no tax on them. For Luxembourg, the low tax burden of corporations is also worthwhile. The status as a tax haven is a job creation program, as banks and investment companies have tens of thousands of employees – most of them from abroad.

• GDP: $58,63 Bn
• Population: 628k
• Secrecy Rank (FSI): 6
• Corporate tax: 25,0%
• Income Tax: 45,8%

It is famous for its traditional European Architecture, and of course as a finance powerhouse.

Tax Havens – Beautiful and Cheap

Tax havens are truly a unique phenomenon, many are home to some of the most beautiful beaches, or idyllic streets, and behind the scenes, are financially completely unique. It is no wonder that People from all over the world become Puerto Rico nationals, when the ocean and the carribean is so close.