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Barbados Spousal Trusts - Tax Avoidance
Posted by Kim G C Moody CA, TEP in International tax - personal on Friday, 25 September 2009

By Marissa L. Halil  LLB BCL

Once again, be warned that this blog is lengthier than usual given the importance of this topic.  Antle v. The Queen 2009 TCC 465 is an interesting new case released on September 18, 2009.  It involved the use of a Barbados Spousal Trust to avoid Canadian capital gains tax on the sale of shares.  In Antle, the taxpayer husband rolled shares with inherent gains to a Barbados Spousal Trust.  The Barbados Trust sold the shares to the beneficiary wife, who then sold them to a third party purchaser.  The sale proceeds from the third party purchaser were used by the beneficiary wife to pay off the Trust.  The Trust made a tax-free distribution to the beneficiary wife.  The Trust was then immediately dissolved.  The result was no tax was payable, either in Canada or Barbados (Barbados does not impose tax on capital gains, which is where the gain arose).  Justice Miller, writing for the Tax Court of Canada, found that the Barbados Spousal Trust was not validly constituted and, even if it had been, GAAR would apply to deny any tax benefits to the taxpayer husband.

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