Every individual, family and family business is unique. However, from where we sit, there is one aspect they all have in common: the need for effective and strategic tax advice. Given the constantly increasing degrees of financial complexity in the world today and a rising trend of governments and other institutions looking for new sources of post-pandemic revenue, we believe tax strategy has never been more important in decision making.
The world is vastly different than it was a decade or even a year ago. Many families are becoming global citizens: they may have children living and working abroad, they may have properties in other countries, or they may be expanding their business outside of Canada. Navigating issues such as cross-border taxes and multi-generational affairs can be challenging, as is staying on top of new taxes and changes to existing tax law, both in Canada and internationally.
Whatever their needs and circumstances, all successful individuals and families want to preserve what they have worked so hard to build. Here are a few examples of how tax strategies can help family business owners do just that.
Worldwide tax compliance: Tax issues across multiple generations can be complex for family business owners to navigate, and even more so when their children are living in different countries. Consider the Canadian couple whose younger daughter is attending university in the U.S., while their eldest son lives and works in the U.K. Both are beneficiaries of a Canadian trust and receive regular distributions. In their respective countries, the siblings face a host of tax compliance issues. In both cases, the aim of an effective tax strategy will be to ensure the family's tax filings are all current and dealt with proactively so that both children remain compliant and avoid onerous penalties.
Luxury assets: Owning a private jet, yacht, or high-end car is indeed a luxury, but it also comes with tax considerations. We'll use the example of a family who decided to acquire an aircraft. Their real estate development business takes them to B.C. to L.A. to Chicago, and their analysis finds that the cost of their own plane would make more financial sense than continuing to fly commercial. A prudent tax strategy would centre on how to buy that asset and how it should be structured within the business to be tax efficient—especially in light of changes potentially coming to Canadian taxes specifically on luxury assets. That strategy would also anticipate liability issues and would therefore include the implementation of policies and procedures for business versus personal use of the aircraft.
U.S. cross-border tax: Many Canadian family businesses and entrepreneurs hope to repeat their success in the massive U.S. market. Those planning to expand across the border certainly want to manage their business in a way that is tax efficient and addresses liability issues. Common areas of concern include structuring the U.S. business and the appropriate entity (such as a corporation, limited liability company [LLC], or wholly owned subsidiary); capitalizing the U.S. business with debt or equity; and addressing the after-tax repatriation of surplus back to the business owner and family.
While we often talk about tax efficiencies, for us, tax strategy isn't just about dollars and cents. It's also about building and maintaining relationships with the individuals and families we work with. Understanding what makes our clients unique is, after all, a key part of preserving their wealth and maintaining a thriving family office. Whether you're planning a cross-border move, want to be more proactive about international tax, have your eye on a new luxury asset, or a host of other circumstances, we will work to understand your family's needs and goals.
What are you and your family looking to achieve, and how are you going to do it? If you need some guidance, check in with us. We can help.