Cross Border for Business Owners

So exit tax can be a scary thing and it can be a significant thing, but calling your team early can planning can make a, can have a very different result with good planning and long lead time.

It sounds like you have maybe some stories, example stories of a case where the call came too late and something could have been done and there could have been a different result in terms of an exit tax or, or ones that have gone very well.

And the lead time has resulted in a very good outcome for the business owner making that departure.

I've had sort of, let's say, non-clients.

I would hope none of my clients that we've had the conversations in the past would do something like this.

But I've had calls from a new potential client and say, hey, yeah, I departed last year.

And oh, by the way, you know, the first thing we would ask for is, OK, like send us your prior year's returns for you, yourself and the companies.

But also send us a detailed net worth statement.

Because this departure tax has the potential to impact every single thing that you own, right? And then it's like, oh, you had a $5 million company? Did you know that? And then, you know, then, of course, they have a heart attack.

And, you know, we start looking at, well, okay, what other options are out there? Have you actually fully moved? Oh, well, no, I still have my residence here that's available to me in Nova Scotia.

Yeah.

We look at the facts around their residency position itself, and maybe they haven't emigrated yet.

And can we buy a little more time? And sort of the other thing that I mentioned just on the corpse, and this is where it can be a bit of a nightmare.

If they have gone, if they are subject to departure tax, and that can't be unwound, there's a second tier of tax, right? So because you're effectively paying tax on the gain on the shares of the company, but When you take money out of the company, you're paying another tier of tax.

And it's that double tax exposure that is a surprise to a lot of people.

It's inherent in the Canadian tax system.

We see it all the time.

But there are techniques that you can use, just like paying a dividend before you depart or... simple things like that up to more complex things like crystallizing gains inside the company to kind of avoid the double tax, right? The tax on the gain on the assets inside the company versus the tax on the gain of the shares of the company.

It's kind of hard to get your head around, but, but that, you know, avoiding double tax.

And we've had some horror stories in that regard where, you know, it's just people have walked unintentionally walked right into double taxation and And in some cases, you know, we do what we can, but it's not entirely, we're not able to entirely eliminate it.

I have another sort of story, life insurance policies, of course, you know, and permanent life insurance can be very, very attractive as we know.

And oftentimes it's more attractive, more compelling when it's held corporately.

But of course, there is value in these policies.

And a lot of insurance agents will say, well, you can access that value, too.

But the bottom line is, you know, life insurance policy in a corporation is value.