February 12, 2021
An ever increasing number of people originally from China now reside in Canada. It is more important than ever to recognize and understand the estate planning obstacles – and the estate planning opportunities – for people connected to both China and Canada. Examples of typical China – Canada connections include:
Here’s a look at the key estate planning obstacles and estate planning opportunities for people with China – Canada connections.
Key Estate Planning Obstacles
Chinese citizens now living abroad typically encounter two very obvious estate planning obstacles:
Currency Control. China has complex laws and regulations for financial processes. The exchange and transfer of money in and out of China is only permitted in accordance with strict guidelines and rules. In part, these rules are designed to prevent large sums from leaving China. Such rules are promulgated by a myriad of Chinese regulators, including the People’s Bank of China, the Central Bank, the State Administration of Foreign Exchange, the National Development and Reform Commission, the Ministry of Commerce, and National Development and Reform Commission. Two key examples of such currency controls are the following:
Stock exchange restrictions. China connected people are arguably more likely than others to own stock listed on one of the two Chinese stock exchanges, Shanghai or Shenzen. Both the Shanghai and Shenzen exchanges have strict foreign ownership restrictions. This means that when planning for the owner of shares listed on one or more of these exchanges, it’s advantageous to depart from typical Canadian planning and move into more customized solutions. For example, in typical domestic Canadian estate planning, a Canadian based family trust might assume ownership of the assets of the Settlor (the person who established the trust). There are various Canadian tax benefits associated with this sort of structuring. However, when the assets include shares held on either of the Chinese stock exchanges, this structuring does not work because of the strict foreign ownership restrictions associated with those exchanges. For this reason, customized and bespoke solutions are more effective for China – Canada connected people in these circumstances.
Key Estate Planning Opportunities
There are also unique estate planning opportunities for people with China – Canada connections.
Trust Planning. Canada has a strong and well developed trust law framework, and hundreds of years of experience and judicial consideration related to trusts. This is in contrast to China’s much more recent adoption of the trust concepts and ongoing development of its fledgling trust industry. Once the China – Canada connected person is resident in Canada, their planning will be based on Canadian planning concepts, with their various international connections (assets, business interests, and family members) taken into account and planned for accordingly. A Canadian resident Chinese person therefore has far greater access to Canadian planning tools, including trusts, to meet their planning needs. Trusts offer a variety of useful estate planning solutions and provide a number of benefits, including the ability to: divide the tax liability on income earned in the trust among family members; control an adult beneficiary’s use of inheritance; protect inheritance from creditors or from a marital breakdown of the beneficiary; and deal with challenging family circumstances, such as a disabled or spendthrift beneficiary.
International Planning. When individuals have connections to more than one country, money will often cross international borders, either during the individual’s lifetime or upon their death. When money crosses international borders, estate planning and tax planning opportunities arise. In circumstances where either a significant amount of money will come into Canada, or a significant amount of money will go out of Canada, there are tax planning opportunities that often greatly benefit the individual and their family. In these situations, structuring a trust in a more tax preferred jurisdiction could be of benefit to the family. There may be additional international tax planning opportunities for people with China – Canada connections; a tailored plan to meet individual needs is typically the most effective approach.
Please contact your McInnes Cooper lawyer or any member of our Estates & Trusts Law Team @ McInnes Cooper to discuss this topic or any other legal issue.
McInnes Cooper has prepared this document for information only; it is not intended to be legal advice. You should consult McInnes Cooper about your unique circumstances before acting on this information. McInnes Cooper excludes all liability for anything contained in this document and any use you make of it.
© McInnes Cooper, 2021. All rights reserved. McInnes Cooper owns the copyright in this document. You may reproduce and distribute this document in its entirety as long as you do not alter the form or the content and you give McInnes Cooper credit for it. You must obtain McInnes Cooper’s consent for any other form of reproduction or distribution. Email us at [email protected] to request our consent.
Sep 20, 2023
Can a business providing both exempt supplies and taxable supplies of goods and services claim Input Tax Credits (ITCs) under the Excise Tax Act…
Sep 11, 2023
Owning your own business offers many opportunities. But it also carries inherent risks, including exposure to personal liability. These three…
Apr 13, 2023
A Will is a key ingredient of any estate plan - and one of the most important documents a person ever signs. It allows a person to control how…
Jan 19, 2023
We updated this publication on March 29, 2023. Beginning April 30, 2023, both Canadian and non-Canadian trustees, partners of a partnership,…
Jul 12, 2022
Lawyers and accountants advise clients on options for organizing their personal and business affairs in a tax-efficient way. Clients enter into…
Feb 12, 2021
Estate planning is a customized process; the goal is to create a plan that’s best for a person’s unique situation. And while all estate…
Dec 10, 2020
The current state of closed Canadian borders and stringent travel restrictions in efforts to contain the COVID-19 pandemic is likely to be the…
Dec 7, 2020
All trusts that continue to be in effect past December 31, 2020, will be subject to new reporting requirements and harsh non-compliance…
Oct 21, 2020
For business owners, estate planning is directed at protecting the business’s legacy as well as the financial security of both family members…
Oct 20, 2020
Estate planning is directed at protecting your assets and your loved ones from creditors and unnecessary income tax or probate fees, and your…
May 21, 2019
We updated this publication on February 17, 2023. As of June 13, 2019, private companies incorporated under the Canada Business Corporations…
Jan 31, 2019
On January 25, 2019, the Supreme Court of Canada considered, for the first time, “Henson trusts” and the nature of a disabled…
Sep 10, 2018
As of January 2019, incorporating a limited company in N.S. will be more economical. On September 7, 2018, the N.S. government announced it’s…
Jun 12, 2018
This publication has been updated as at July 8, 2022. Changes to the Canada Business Corporations Act (CBCA) over the past several years have…
Apr 2, 2018
Equity compensation plans are a valuable and versatile tool for many corporations, from early-stage startups to established blue-chips.…
Jan 12, 2018
Whether a provincial court will grant police a “production order” under the Criminal Code of Canada requiring a non-Canadian company to…
Dec 23, 2017
Parents often threaten their children that if their behaviour did not improve they will get a lump of coal in their Christmas stockings. On…
Dec 22, 2017
Blockchain technology has already been a transformative force in a number of sectors. Its most prominent use to date has been as the…
Nov 20, 2017
October 2, 2017 marked the end of the consultation period relating to the taxation of private corporation proposals the Department of Finance…
Nov 2, 2017
On October 19, 2017, the Toronto Stock Exchange (TSX) announced it had adopted amendments to its Company Manual. Originally proposed in Spring…
Sep 22, 2017
Canada’s most important trading relationship is – in all likelihood – about to change: the current U.S. administration has put the future…
Aug 28, 2017
Recently, the Federal Court of Appeal confirmed that a tax debtor’s bankruptcy does not extinguish the federal Crown’s priority to proceeds…
Aug 16, 2017
In the not-so-distant past, Canadian enforcement of its anti-corruption and anti-bribery legal regime has been relatively laid-back. But the…
Aug 4, 2017
On July 18, 2017, Canada’s Minister of Finance released proposed changes to the Income Tax Act (Canada) that, if implemented, will mark one of…
Jul 17, 2017
A corporation does not always sail in calm or safe waters. Cash shortages, unattainable or unmet goals, Board disagreements over the best course…
Jun 23, 2017
On June 23, 2017, the Supreme Court of Canada decided that in a contest between the choice of forum clause in Facebook’s online terms of use…
Apr 21, 2017
In three years (lightning speed in the law), medically assisted dying went from being illegal to being legal. A great deal has changed, a great…
Apr 20, 2017
On April 13, 2017, Canada’s federal government introduced legislation that, if passed into law, will legalize recreational cannabis in Canada.…
Apr 17, 2017
Recreational cannabis isn’t legal yet - but much of the associated stigma is already gone, usage is up and employers are feeling the workplace…
Jan 20, 2017
Connections between Canadians and the U.S. have never been as numerous or transparent as they are now: many Canadians own U.S. property, have…
Dec 22, 2016
Effective January 1, 2017, the kinds of trusts that can claim the Principal Residence Exemption (PRE) will be limited. Now, the PRE allows…
Dec 14, 2016
On December 9, 2016, the Supreme Court of Canada clarified when a court can rectify a transaction that has had unintended tax consequences for…
Nov 22, 2016
Canada’s most important trading relationship might undergo some change with the results of the 2016 U.S. election. Facilitating cross-border…
Aug 15, 2016
The standards expected of market participants are steadily increasing in response to demand to address white collar crime – including…
Jun 30, 2016
As of June 25, 2016, provincially regulated workers and employers in Nova Scotia, Quebec, BC and Saskatchewan can participate in Pooled…
Jun 6, 2016
On June 3, 2016, the Supreme Court of Canada, in two related decisions, strengthened the legal protection of solicitor-client privilege in…
Jun 6, 2016
On June 30, 2016, amendments to National Instrument 45-106 Prospectus Exemptions and related changes to Companion Policy 45-106 Prospectus…
May 31, 2016
You’re on a tight timeline to issue a press release. You finish your draft and ‘cut & paste’ your standard “forward-looking…
Apr 15, 2016
On April 14, 2016, Canada’s federal Justice Minister proposed legislation setting out the conditions that a person wishing to undergo…
Oct 23, 2015
Incorporation offers legal advantages to sole proprietors of small businesses, including certain tax advantages. However, when a corporation…
Oct 19, 2015
Access to sufficient capital to fund operations, research and development, and other costs is a key challenge for start-ups and for some small…
Jul 30, 2015
Note: On June 9, 2016, the Supreme Court of Canada dismissed the National Alliance’s application for leave to appeal the New Brunswick Court…
Feb 9, 2015
NOTE: On April 14, 2016, the federal government proposed legislation setting out the conditions that a person wishing to undergo…
Sep 16, 2014
This publication has been updated as at August 25, 2022. Many believe that only public companies or large, established companies with many…
Sep 11, 2014
The Canadian federal government has been concerned for some time about “treaty shopping” by non-residents – the practice of non-residents…
May 22, 2014
This publication has been updated as at February 17, 2021. Trusts offer a very useful estate planning solution for a wide variety of special…
Subscribe to McInnes Cooper to stay current with our leading insights on legal updates, trends, news, events, and services.