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Canada is now an improved tax haven for Fairfax


Aberhound
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A new tax information has been signed between Canada and Bermuda.

 

http://www.pwc.com/bm/en/assets/document/pwc_bda_tiea.pdf

 

Basically any active business income placed in a Bermuda subsidiary and certain passive income is now only subject to tax in Bermuda and if paid by dividend to the parent corporation is now usually subject to no further tax in Canada and is deemed to form part of the exempt surplus. Previously the rate of tax in Canada on such dividends was 26.5% according to this PwC write-up. Bermuda taxes consumption, not income or savings so has a near perfect tax system and has a better pool of insurance industry employees than Barbados plus excellent common law Courts.

 

This should give Fairfax more tools to lower their effective tax rate. The agreement is clearly made to benefit insurance companies based in Canada. I wonder if other Canadian companies will form subsidiaries in Bermuda to conduct active business or to hold qualified passive investments?

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