7

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Date:

To:

November 2, 2000
All Canadian Partners

All Tax PrOfessionals
From:

Paul B. Hickey, Nn.riomtl'Tax

Subject:

Tax Product Alert: Offshore Company

This Tax Produd Alert (TPA) introduces an innovative high value product for wealthy
Canadlansk· generaUy thos~ who haYe $10 million or more to invest dffshore before January 1.
20t>2. It fras been devcfopecl in response l9 the demise oflhe off$hore ttusl as il tax plunning
vehicle and may provide a sol,ution ~o ex-isting offshore trust arrangements which rnust be
restructured n.s a result of the Ju11e 22-,. 2000 draft legislation; In addition it may appeal to Weill thy
Canadians. interested fn creditor protection, philanthropic activities, or hl implementing an estate·
freeze of pubiic or private company snares Which have signiflcant growth potential. However,
any contributions to Offshore Company mad<:; by Canadian residents must occur prior to January
1, 2002- morder to uvord certain proposed foreign reporting requirements.

The Offshore Company product. uses a special type of corporation and em.ulates the private
companies that have been used by wealthy Europeans for many years.
- It is quite possible lhilt we may only be able to implement a limited number of these arrangements
so. it is quile important that you identify and pass along the names of any clients or targets you are
aware of to your regular KPM.O tax advisor or ·to Barrie Philp ih Vancouver (604-691-3383) as
soon as possible. ? lease note that we will no~ cotl:tact any client without you first bei'ng involved.

Ple(tse read carefully lhc attached TPA and consider clients for whom this product would be
appropriate. .
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Alert
99-04

November 2, 2000 .
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. Internal Use Only - No! for Distribution or Circulation Outside th9 flnn
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• ' ' • • ' ' t • • • t ' o f ' \ o>;, • o o • • • • • o o o o o • o o o o o • • o o o 0:.,.., o 7 o 1 < , ., • .• •• o • o o • o o •• ~ • t I 0 • • • • o 0 o

•

Offshore Company
Product Prome

'th.is innovarive product has been developed in response to the demise of the offshore tru~t as a
tax planning vehicle for wealthy Canadian fndividuals. lt use11 a special type of coll'or.ation .and_
emll.lates the private foundation!) rh&t have been. Q~e9 by wealthy Europeans. Among o~her things
it can provide for:

.,

investment and accumulalion of assets With no tax;
flexible estate planning,
elimination of probate requirements and costs
.
protection assets froiTi wealth, estate and inheritance taxes,

..

protection from forced inheritance and community of property laws

ro
o

protection froni creditors
con(ldentiality

o

the ability to receive distributions free of tax

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11

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or

RecerH Success Storie.'>
Banie "Philp (GVA) has completed 7 engagements and Serge Bilodeau (GMA) has completed 2
cngagemr;nts.

QQtimal Target CharJctetistics
•

High net worth inQividuals with u minimum $5 million to invest offshore

..

Individuals with existing off:Shdrc trusts whiCh must be restructured as a resu!l of the June 22,
2000 draft lcgil)lation

"

Individuals with maturing. irrtmfgration trusts

o

Shareholders of Canadian private and pul;>fic companies with significant growtq potential
interested in a"n offshore estate freeze

..

High net worth individuals concemcd about c.;rcdi!or prot~tion, estate tax. wealth. tax,
inheritance taxes; probate costs. forcecj.inherifancc laws, commuhity of property laws etc.,

 'I 5

<~>

Individuals interested in philanthropic activitie$ without the constraints of Canada's charitable
foundation rules

It should be stressed tha~ any contributioi1S to Offshore Company by residents of Canada
must be made before·January 1, 2002.

Typical Buyer

High m:t worth clients and targets who nrc interested in offshore tax planning.
Pridng and

Fee Arrangements

of

Fees should be value-based in the range 15% of annual tax savings, l% of invested capital or
other appropriate ba~is depending upon.the application ;~nd the value. to lhe client, with minimum
combined fees and set up costs of $100,000 to $125,000, depending Upon options chosen. This
minimum fee range includes all legal costs and the Hrst year's minimum directors', license,
registration, secretarial and administration fees. RGtainers required.
Servtcc Delivery

Barrie Philp (OVA) the National Product Champion should be involved and consulted as an
pPrt oft he sales and del.ivery t!!ain as he hus the most cxpcri.ence and background on the
product. The fo!lowing office/region ptoducc champions wiU also be involVed in the deployment
und delivery of the product:
integ~:al

National Product Champiort/
British Columbia

Barde Philj.'l

PH 604-691-JjSJ

Calga.ry rw~·st

Lloyd Heine

Pll40~-69l-8104

Gt A/Ontario

Georae Oer·tler

Karen Aziz ·

PH 416- 777 ~337 5
PH 514-840.2138

Deni:s Lac.rqix

PH 514-840-2550

GMNQuebec/Atlantic

Pr<Jduct TMHdl

We have dcv~lopcd n comprehensive impleme ntation packa'ge an.d have arrangements in place
wi th oth~r service provider-s, induding institutional shareho tders, tlir.ecto rs and management
scrv-iee compan fcs to support this high value product. We h11ve nlso 9btalncd an independent legal
opfnion ·on the pr0duc1 which rnay be- mude available to the clicn(. Due to the proprietary nature
of this high vnlue produc~ access to the toolkit Will be restricted to the product champions noted
nbovc.

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'!' 0l

Action Required by Client Service Ptofe.sslonals

lt is possible that only n limited numocr qf tln~se nnangements may be implemented. Client service
professionals- who are aware of cU~ts itnd targets th:at fit the target pro fib should contact your
regulnr tax. services professional, your office or region product chlm)pion or Barrie Philp (6046-91 -3:?8:1) as soon as possible.
Distribution:

Car1adian Partners

All Tax Professionals

Tax Product Alert is a periodic publication of KPMG ~a.tional Tax and is Gdited by Paul
B. Hickey, Pattnet-in-Charg~ Tax KnoH-:ledge Manag~ment and Product Development
and wri Dt~nn, SeQior Manager; of Nation::! I Tax • Ta-x Knowledge Managemcnl and
Product Deve!op1i1ent. for more inform:atron on KPMG's tax products, visit tfte Tax
Home Page on RPMG Intraweb at Tax Produ~ts.
The inforrnatio}'l contained in Tax Product Alert I~ general in nature. Any fechnkaJ
discussion is based on authorities that ar.e subject to change. The r~del' is responsible
for evaluating rrnd determining !he n:ppUcability of-Hie-infofltlation·contained her~in to
specific facts and situations. A~ditional due dilig~nce to assess the viability of any
'strategy, issue., or opportunity presented in Tax ?rodw:;t Alert is requfh)Q,

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