Offshore trust and its legal tax implication: A Canadian and Mexican point of view

Offshore jurisdictions have been the object of a legal struggle between onshore governments, wealthy individuals, enterprises and international organizations that has resulted in the passing of anti-offshore legislation.

Trusts are one of the most important vehicles currently used by offshore jurisdictions because of its flexibility which allows the inclusion of specific features such as the tax planning benefit and the asset protection feature. Despite the latter characteristic of offshore trusts, this paper has only examined their tax consequences. However, to recognize the line that divides the asset protection benefit and the implications of tax deferral a brief explanation is provided.

This paper presents the legal tax implication in two of the major legal systems of the world, the common law, (represented by Canada), and the civil law, (represented by Mexico). Despite the differences between these two legal systems, they face the same problems, thus underlining the importance of analysing how each country deals with it.