Bob Keats Interviewed by Accounting Today!


Advice to Canadians: Take Your Money and Drive!

JULY 13, 2012



For Americans, long subject to the complexities and confusions of the Internal Revenue Code, it may come as a shock to find that some believe the U.S. to be a tax haven.

Yet that’s exactly what Phoenix, Arizona-based financial planner, Robert Keats, tells his high net worth Canadian clients: “Take Your Money and DRIVE!”

“The Canadian’s best tax haven is the United States,” he said.

Keats, president of KeatsConnelly, a cross-border wealth management firm, specializes in helping Canadians and Americans lead a cross-border lifestyle.

Traditional tax havens have a number of disadvantages, he observed. “The assumption that there are no taxes in offshore jurisdictions is a myth. And any personal relationships are bound to suffer due to the geography of living on an island in the middle of nowhere. Simple things such as setting up bank and credit card accounts become surprisingly complex when trying to do it in an offshore tax haven.”

But the number one reason for the U.S. as a tax haven for Canadians, and vice versa, is the U.S.-Canada tax treaty.

Canadian taxpayers who leave Canada to live in a traditional tax haven—which isn’t covered by a treaty—must clearly sever all residential ties and leave nothing they own in Canada, he noted.

“Something as minor as leaving furniture in storage, holding a Canadian driver’s license, or leaving a vehicle in Canada can send the CRA on a rampage to tax the expatriate as a full Canadian resident.”

On the other hand, to prevent double taxation the treaty provides tiebreaker rules to determine whether an individual is taxed as a resident of the U.S. or Canada. To a certain extent, these are under the control of the taxpayer, and allow tax planning that would otherwise not be available.

Moreover, Keats said, a tax treaty hardly ever changes, and its terms take precedence over the Income Tax Act rules in Canada and the Internal Revenue Code in the U.S.

An overwhelming amount of high net worth Canadians seeking relief from high Canadian taxes are commonly and erroneously counseled by large accounting and law firms to relocate offshore to the tax haven islands, according to Keats. “These individuals and families suffer a decline in their desired lifestyles, and the majority of them do not realize the disadvantages until the move has already been made,” he said.

One of the areas which made the U.S. such an attractive option—its health care system—will be decidedly less attractive.

“Thousands of Canadians come to the U.S. to get medical assistance,” Keats said. “They were on the waiting line in Canada but they didn’t want to wait any longer, so they ended up paying for it twice. Part of protecting the cross-border lifestyle is getting access to both the Canadian and U.S. medical systems—even the Canadian system has some things they do reasonably well. The big thing is you want access to both systems so you can get access to both worlds.”

One individual who turned to Keats for advice was on a waiting list for open heart surgery years ago. “Because the Canadian system places you very low on the priority list for open heart surgery when you’re in your 70s, he basically figured he was going to die while he was on that waiting list. He got his green card and had his surgery within a few months. Now he’s in his 90s and plays golf every day.”

Posted in In The News
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