The taxation policy in Canada is governed by several policies which takes place under the federal government of Canada. The Canada Taxation has been formed under the Constitution Act in Canada which was first implemented in the year 1967. The powers related to the policies of taxation are vested in the parliament of Canada. The taxation was done at 2 levels, one of which at the federal level and the other one at the provincial level under the provincial legislatures.

Some of the main objectives of implementing the taxation policies include:

1) Rising the money by implementing the methods and the systems of taxation

2) Under the legislatures at the provincial levels by employing the direct taxation policy in order to raise the revenue to sort the needs and the requirements of the funds at the provincial levels. The taxes which are collected under the small states, provinces or legislatures are known as the tax havens.

3) Collection of money from the licensed business such as shops, Auctioneers, Tavern and other licenses in order to generate the revenues for the Local or the Municipal Purposes.

The municipal courts were assigned by the provincial legislatures in order to collect the direct taxes.

An example of the direct tax includes the property taxes.

The taxation policies as per the definition given under the Supreme Court of Canada in 1930 involved the following characteristics:

1) The taxation policies that are made by the government can be enforced under the federal law of Canada.

2) The Direct policy of the Canadian Taxation scheme can be imposed under the legislature authority.

3) The taxation policies of the government are levied under any public body.

4) The taxation policies are intended only for public purposes and for the benefit of the people.

In the year 1987 some amendments were made in the taxation policies for the non residents. The taxation policy for the non residents included all those people who either did not belong to Canada or reside outside Canada for more than 183 days in the tax year. The people who fall under this category had to pay the taxes according to a different taxation schemes. The taxation policy for the Canadian government collects the taxes from the non residents so that these taxes can be used by the government for the welfare of the people.

    The taxation, be it the resident taxation or the nonresident tax falls under two major categories.

1) Direct taxation: The direct taxation policy depends on the policies which look into the payment in the form of amount. Thus in cases of direct taxation policy the tax have to be paid in cash.

2) Indirect Taxation: indirect taxation is the taxes that have to be paid by the companies and the corporate in the form of revenues. These taxes thus are not paid directly by the people but the companies.

Thus the policies that are implemented by the government of Canada have been made in accordance with the needs of the government in terms of the revenues and funds and is implemented according to the planning and the strategy.

On becoming a resident of Canada, an individual’s world income is automatically subjected to Canadian tax. However, there is a specific exception, when an immigration trust is used to hold foreign investment assets. For many years, Canada has been a tax haven for high net worth individuals who chose to immigrate to Canada through the establishment of so-called “immigration trusts”.

The Income Tax Act (Canada) allows a new resident of Canada to establish an offshore trust for up to five taxation years during which time the income earned within the immigration trust structure escapes Canadian taxation even if capital distributions are made back to the immigrating settler of the trust. This has been a very attractive vehicle for wealthy individuals to utilize in order to come to Canada to obtain a Canadian passport since the residency requirement for such a passport is only three years.

However, the protected status enjoyed by immigration trusts has survived, offering new residents to Canada a significant tax-savings opportunity in their transition to Canadian tax residency. An immigration trust is simply a non-resident trust, established in a foreign tax jurisdiction that holds foreign investment assets.

An immigration trust can be established prior to the individual becoming a resident of Canada or at any time within the first 60 months of Canadian residency. However, because the 60-month tax-free period commences at the time Canadian residency is established, the tax-free accumulation of income and capital gains in the trust is maximized when the trust is set up prior to becoming a resident of Canada.

Even after the five year exemption is over and the immigration trust becomes subject to tax in Canada, it may continue to serve as an asset protection trust for the benefit of multi-national families residing in and outside Canada.

Once the trust is established, the immigrating individual can transfer various foreign assets to the trust, including an investment portfolio or real estate. During the first five years of the immigrant’s Canadian residency, income and capital gains can accumulate tax-free in the trust. At the end of this period, if the trust is still in existence, it loses its tax-free status and is treated in the same manner as a Canadian resident trust.

In addition to the tax savings, immigration trusts can provide other benefits, including creditor protection for trust assets, reduction of taxes and probate fees on death, and privacy and confidentiality of personal financial information.