"I am Canadian and would like to evaluate the 'Private International Investment Contract' strategy..."

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Category: International Planning Q&A

Published on Tuesday, 27 September 2011 10:01

Written by Greg McNally

Question from a Canadian-based IM Member:

Q: "I am Canadian and would like to evaluate the 'Private International Investment Contract' strategy. Special areas of interest: use of corporate funds, control, local defensibility, fees. Can you please advise how to do that? Thanks."

A (by Greg McNally): I would need to know more about the specific strategy and who was offering it, but I would be very cautious as there are a number of fraudulent schemes based on "investment contracts."

If the reference to "corporate funds" means retained earnings held in a domestic company, domestic corporations can enter into international tax plans in the same way as individuals. In fact there is usually more flexibility, especially in respect of active income deductions.

Control varies depending upon the structure. If the plan is based primarily on contractual relationships, then the client might be able to participate in some practical control such as co-signing authority at a bank. However, if the plan is based on a fiduciary relationship (such as a trust or foundation), then the client needs to be very careful not to exercise control in such a way as to defeat the plan.

People often ask about how safe a jurisdiction is? That is a relevant question, but even for smaller countries like the Turks and Caicos Islands or Anguilla, for instance, there is often times no fear of loss of assets due to a collapse or overturn of the government, as your funds are usually with a financial institution that simply has an operating branch in the country and does not necessarily keep its assets there.

Fees vary based on the structure in the amount of assets held. However, international business corporations with the use of the registered office nominee shareholders, directors and officers usually cost somewhere in the range of US $2,500 to set up and US $1,750 to maintain, including government fees. Trusts and foundations usually cost somewhere in the order of US $2,500 to set up and $4,000-$5,000 US annually. Insurance solutions usually cost upwards of US $10,000 to set up and US $15,000 annually.

About N. Gregory McNally, BA, LL.B, MBA, JD, LL.M (Int'l Tax), TEP
A Canadian by birth, Greg McNally is an international tax lawyer by training. He has earned various degrees, including law degrees in both Canada and the United States, a Masters of Law in International Tax and a Masters in Business Administration. He practiced law in the Turks and Caicos Islands for 10 years from 1992 until 2002, when he returned to Canada and joined the Royal Bank (Global Private Banking) as their Senior Manager of International Services in Toronto. In 2004, he started an international tax consulting firm called N. Gregory McNally & Associates Ltd., where he now oversees the development and implementation of customized international wealth management solutions on behalf of high-net-worth and ultra high-net-worth clients.

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Tags: Canada , Greg McNally , trusts