Canada: Tax Exile Planning 101: Seven Steps to Effective Second Citizenship/Residence Strategizing for High Net-Worth Individuals

"Failure to Plan is Planning to Fail"Stephen Covey

If you are or aspire to be a High Net-Worth Individual ("HNI"), you have different attributes, needs and concerns than the general population. Along with wealth, a HNI typically has a great deal of real life experience in business, wealth management, proper use of qualified professionals, and geo-politics. A HNI also tends to have a more complicated business/ financial life and has established a personal lifestyle that is beyond the reach of most of society. Unfortunately, the "deep pockets" of a HNI also make them the preferred target for tax revenue, property theft and lawsuits.

Properly husbanded, these attributes can allow a HNI to fulfil all of their needs and isolate/reduce or eliminate their concerns. This article will examine the use of residence/ citizenship and domicile planning for HNIs.

Residency, Domicile and Citizenship

In order to consider this type of planning, it is important to have a thorough understanding of the above key terms.

Residency generally has both a tax and an immigration element to it.

Tax residency is usually based upon a count of the number of days a person spends in a jurisdiction or a review of various indicators/ symbols of residence (i.e. home, bank accounts, vehicles, club memberships etc.). Immigration residency is usually granted on a temporary or permanent basis. It may allow an individual physical presence, re-entry, employment or study rights.

Domicile is an estate tax concept, which concerns a person’s "ultimate home". All persons, even "perpetual tourists" are deemed to have a domicile. A person acquires a "domicile of origin" at birth. They may acquire a "domicile of choice" by changing residence and acquiring long-term trappings of a new home, such as gravesites and new wills. It is also possible to acquire a subsequent "domicile of choice" by severing ties in the first "domicile of choice" and re-acquiring them in a new jurisdiction.

So a person might leave the United States for Ireland and after several years in the Emerald Isle move to Canada. If a person abandons their last "domicile of choice" without acquiring a new one (e.g. becomes a "yachtie"), then under U.S. law their domicile reverts back to their last domicile. This is different from British law, which states that a person, who has a U.K. domicile of origin, reverts back to the U.K. domicile of origin, upon abandonment of their last domicile of choice.

Citizenship is a status granted by a country and may include various rights such as travel documents (passports), voting, land ownership, and the ability to hold public office, etc. A country may grant citizenship in various ways including:

  • Birth in the jurisdiction;
  • Lineage (through parents and grandparents);
  • Marriage;
  • Naturalization;
  • Religious affiliation (i.e.: law of return to Israel);
  • Meritorious service; and
  • Economic benefit to the country (i.e. economic citizenship programs).


Let us now examine the proper steps in order to devise, evaluate and implement an effective strategy.

Step 1: Self-evaluation of personal and business necessities and preferences: The following is a sample list of possibilities:

  • Lower current income and capital gains tax liability
  • Eliminate future estate tax liability
  • Increase quality of life (may apply to either current third world conditions or deteriorating first world conditions)
  • Expand business or investment opportunities outside of home country
  • Increase personal security while at home and abroad
  • Ease of travel (may not be able to currently get visas or may be experiencing unwanted difficulty traveling on current passport e.g. Arab or U.S. passport)
  • Low profile travel after entering a country
  • Ease of banking (i.e. some financial institutions make it difficult or impossible to open and operate accounts for nationals of certain countries i.e. U.S.)
  • Increased ability to enter and reside within certain trade blocks (e.g. EU and NAFTA countries)
  • Decrease litigation target profile

Step 2: Evaluation (by self and *domestic professional advisors) of issues related to departing or expanding out of your current location. These issues may include:

  • Reorganizing current control mechanisms over business and finances in order to delegate direct supervision;
    • Evaluating potential tax savings opportunities e.g. price sharing, declaring non-residence, expatriation and anticipating possible "triggering events" such as deemed dispositions and "expatriation" tax;
    • Limits on ability to remain in current location for extended periods of time after a strategy is implemented;
    • Determining the need for new residence, citizenship and domicile to deal with issues in current locale.

    (*Author’s Note: A typical HNI will already have a team of lawyers, accountants, bankers and business advisors who are very familiar with the individual’s personal and business situation. In addition, these advisors are often very attuned to the HNI’s risk tolerance and personal comfort level in implementing any strategy. Unfortunately, it is rare that this same team of advisors also has extensive experience in conceiving and implementing international plans of this nature. A HNI should retain qualified specialist domestic and international advisors who are familiar with these types of strategies to conceive of possible plans. They should then use their existing team of advisors to work with these new advisors to evaluate and if appropriate implement these strategies.)

    Step 3: Evaluation (by self and international professional advisors) of issues related to entering, acquiring or expanding into several likely new locations. These issues may include:

    • Confirming the legal ability of a new location or combination of locations to supply the appropriate status(es)**;
    • Review of personal lifestyle and business requirements of new location(s), if you will need to limit your future physical presence or connections with your current locale. This will include:
    • Cost of living;
    • Private (e.g. shops, restaurants) and public (e.g. hospitals, roads, airports) infrastructure;
    • Accessible quality health care and educational facilities (if there are children or continuing education);
    • Ability to carry out business or hobbies;
    • Personal security;
    • Accessibility if you travel or people travel to you;
    • Rule of law;
    • Climate and language;
    • Availability of suitable short and long-term housing; and
    • Culture and recreation.

    (**Author’s Note: The international advisor should be able to provide the HNI and their domestic advisors with appropriate copies of legislation and/or opinion letters confirming the target country’s enabling legislation. A HNI should run from anyone who talks about "special discretion from a passport official". This is a code phrase for bribery. Along with becoming entangled in Corruption of Foreign Official legislation; using a passport/ residence permit acquired in such a fraudulent manner will result in a sizeable jail term in most western countries. Canada will hand you a five-year jail for simple possession of such a document.)

    Step 4: Work with domestic and international advisors to determine the best possible apparent destination and do a preliminary examination of costs to implement a strategy relating to departing/re-organizing current locale and setting up/ expanding into target country(ies). It is better to spend a small sum to fully explore the costs of implementing a strategy before spending even larger amounts in implementing an inappropriate strategy.

    Step 5: Travel to target destination(s) and personally review your list of business and personal necessities/preferences and confirm their availability, cost and quality. In short, take a "test drive".

    Step 6: Execute the fully explored and confirmed strategy. It is best if the strategy can be implemented in stages so that the HNI can evaluate its effectiveness and suitability on an on-going basis. This gives the HNI suitable comfort prior to proceeding with the cost and effort of implementing the next stage.

    Step 7: Continue to monitor on-going changes in home country and new locations to determine if there are any required modifications to the initial strategy.

    The Perpetual Tourist (PT) Strategy and why it doesn’t work

    There’s a mythic fascination with the "perpetual tourist" (PT) strategy. It’s a simple notion. A person simply moves out of a high tax jurisdiction like the U.S., U.K., or Canada and begins the life of a vagabond, traveling from jurisdiction to jurisdiction every few months. Its advocates claim that by maintaining this "low profile" lifestyle they will be able to avoid any tax liability anywhere.

    However there are some significant problems with this strategy. Firstly, moving from place to place with few possessions; no home (either mentally or physically); and not really having any long-term plan, is not the type of strategy that would be an acceptable lifestyle for most HNIs. Even the most nomadic HNIs like having friends, country club memberships, and a place to call their own. And clearly, this doesn’t work if the HNI has a family in tow.

    Secondly, the PT strategy relies completely on secrecy or low profile for success. With decreasing bank secrecy; John Doe credit card subpoenas and the increased use of government databases in the search for terrorist money launders, it is less likely these people will be able to successfully live a "cloak and dagger" existence.

    Finally but most significantly, unless an individual acquires a new domicile and a new residence, their last "home country" would still consider them resident and domiciled. After all, the ties were never severed and no new "tax home" has been established. In other words, shedding of the trappings of residence and domicile in one jurisdiction is not enough to sever residence and acquire a new domicile of choice. You must re-acquire and re-establish all these ties in another jurisdiction.

    Deciding to take the first step

    Constantly changing domestic rules result in long-term uncertainty and "change fatigue" for many HNIs as domestic advisors suggest expensive on-going revisions to their "estate plan". Continuing government actions will become triggering catalysts for increasing numbers of forward thinking HNIs to take the required legal steps to fulfil their needs and goals while eliminating or isolating dangers to their situation.

    Throughout history, events such as the Irish Potato Famine, the Scottish Highland Clearances, the Russian Pogroms, and World War II were major historical events that drove HNIs to seek out new possibilities. The modern "War on Terrorism" and on-going domestic, regional and international tax "fairness" initiatives may well be remembered as the factors which inspired a new generation of HNIs to review their current lives. The resulting changes to their current residence, domicile and citizenship will certainly greatly enhance the lives of the generations that follow them.

    Undertaking these changes in an effective, timely, and cost-efficient manner is the immediate and major challenge for these pioneers and their advisors.

    Recognizing the impact and predictable fallout of current events is the first step. Taking action is the second.

    Copyright © David S. Lesperance

    The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

    To print this article, all you need is to be registered on

    Click to Login as an existing user or Register so you can print this article.

    In association with
    Related Video
    Up-coming Events Search
    Font Size:
    Mondaq on Twitter
    Register for Access and our Free Biweekly Alert for
    This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
    Email Address
    Company Name
    Confirm Password
    Mondaq Topics -- Select your Interests
     Law Performance
     Law Practice
     Media & IT
     Real Estate
     Wealth Mgt
    Asia Pacific
    European Union
    Latin America
    Middle East
    United States
    Worldwide Updates
    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions