With a team of 150 in six offices across the globe, international tax firm Trowbridge focuses on three core areas: global mobility, private client services, and corporate tax. We sat down with Santosh Prasad and Ernie Nagratha from Trowbridge who shared their extensive expertise and experience in helping individuals and corporations to set up and operate abroad.
CEC: What are the main services Trowbridge provides for those in
EN: We deal quite a bit with Canadians and Americans that choose to relocate to Cayman. I deal a lot with the individual tax side, while Santosh deals with the corporate side. We see many individuals moving within Canada, the US and UK looking at Cayman as a permanent destination.
SP: From a corporate perspective, we work with companies where the individuals have chosen to move entirely to the Cayman Islands and break all their ties and residency in Canada. Making a full move to Cayman and conducting business in other countries makes sense but being a Cayman resident and still operating a Canadian business is a lot more challenging and not as tax advantageous.
CEC: What's the biggest question you get about doing
business or living in Cayman?
EN: From an individual perspective, it's probably the benefits of becoming a non-resident of Canada for tax purposes and being able to live and work permanently in Cayman. Or to retire there. In many circumstances, when an individual hands over their Canadian tax residency, they're no longer subject to tax in Canada. So, in theory, they're able to be tax-free.
SP: From the corporate side, we're asked a lot about setting up a Cayman company and how you can save on tax. It's important to know that Canadian laws are not as lenient, so if you still have ties to Canada, you can still be taxed. To set up a company in Cayman and benefit from the tax laws there, you have to move there and give up Canadian residency.
So this situation works well for digital nomads or those who want to work remotely to serve clients from anywhere in the world, so long as they're willing to make that initial break of ties to Canada.
CEC: Are there any taxes associated with leaving Canada or the
US for those relocating to Cayman?
EN: There could be in certain circumstances, for example, individual personal holdings in terms of investments or other assets which could be subject to deemed disposition. This means that the Canadian Revenue Agency would tax them on any accrued growth in certain investments and assets. But it depends on the specific situation.
SP: From the company side, if you're an American citizen or green card holder looking to maintain that status, it's important to keep in mind that it doesn't change your tax status as you will still file with the IRS. Canada is based on residency, and where you're deemed to be living, but in America, you're always considered an American citizen.
CEC: Can you still operate your company outside of Cayman and
benefit from the tax-neutral status?
EN: You have to be a non-resident of Canada to get the tax neutrality of Cayman and for individuals, you can't be residing in Canada for more than 183 days in a year or you're considered a Canadian resident.
But I would also say there are some nuances around this, particularly with hybrid working post-COVID-19. People should be careful how much time they spend in a jurisdiction, even if it ends up being less than six months because that could be seen as their primary home due to the nature of that jurisdiction or how they conduct their business or personal affairs.
Given the multi-jurisdiction lives that many expats now live, you would want to be evaluated properly to make sure you're not causing yourself to be seen as residents of a particular jurisdiction when you're not intending to be.
CEC: What's the number one reason individuals or
corporations would work with you on moving to CEC or Cayman?
EN: For both individuals and corporations, it would usually be evaluating tax residency for either moving abroad permanently or temporarily. We would handle those matters properly for both Canada and the foreign jurisdiction.
CEC: Finally, what's the number one thing you wish people
knew about tax when moving offshore?
SP: I would say that in order for a move to Cayman from Canada to be the most tax effective it needs to be fairly permanent and decisive. In Canada, residency is very factual, so you need to make your situation as clear-cut as possible.
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