immigrant-ethnic-client

Budget 2014 eliminated immigration trusts, effective immediately. This means Canadian newcomers will no longer get a 60-month tax exemption for foreign assets.

The immigrant’s foreign-sourced assets would’ve otherwise been subject to Canadian taxes, so the program enticed non-residents to come here, says Kim Moody of Moodys Gartner Tax Law.

Read: Golombek: Budget brings targeted tax changes

This change “will certainly make immigration a more painful tax exercise for very wealthy immigrants,” he says.

“It’s possible the elimination of the immigrant trust rule will be a disincentive for people who aren’t used to Canada’s high tax rates (like those from China or Hong Kong) to take up residence in here,” says Dave Rickards, partner at Grant Thornton LLP.

Still, experts say the issue’s being blown out of proportion.

“It’s not going to stop individuals from coming to Canada. There are other reasons to come here,” says Wilmot George, director, Tax and Estate Planning at Mackenzie Investments. He adds these include business and investment opportunities, as well as family ties.

Read: Immigrants need help accessing credit

And some media outlets report the change will impact housing markets, since many immigrants invest in property. Experts disagree.

“For people who were going to invest in Canada, it means nothing,” says Rickards. “You’d never put Canadian property in an immigration trust. You’d own that directly. This elimination doesn’t impact that, particularly with respect to real estate.”

Read: 4 housing markets to watch in 2014

Adds George, “If you’re coming to Canada to invest, any property you purchase will be subject to tax anyways. The only money that wouldn’t have been taxed would’ve been monies and/or property that reside outside the country.”

Still, clients may not understand what’s changed. So advisors should talk to clients whose families are planning to immigrate.

“Let them know that assets that otherwise would’ve been sheltered will no longer be,” says Rickards.

Originally published on Advisor.ca

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