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No one likes paying taxes. Scam artists know this and often try to use it to pull off a scam. However, just because someone says they can save you taxes on your investments doesn’t mean they can, nor does it mean they can do so legally. Enter offshore investment and pension/retirement scams.
Offshore investments scams promise a high rate of return for an investment in an offshore market. They’ll also throw in the caveat that an offshore investment is a great – and legal - way to avoid taxes.
Sending your money to another country is a risky move. Once your money is outside Canada it is now under someone else’s control and this increases the chances you may not be able to get it back. The promised tax savings are also typically a scam, since investing offshore doesn’t necessarily mean that no taxes are owed, whether it is in Canada or another country. Tax laws are complicated and you should always seek professional advice on the potential tax consequences of investing.
Pension scams are especially troubling because it can drastically effect a person’s financial stability during retirement. Most pension scams target a person’s locked-in retirement account, asserting that there is a way to take money out of your locked-in retirement account without paying tax. Avoiding or reducing taxes when withdrawing from your locked-in retirement account may be possible, but regardless of your personal or individual circumstances, there are limits to how much money you can withdraw each year, and paying some amount of taxes is very likely. If someone tells you different, it may be a scam.
Be wary of any promise or scheme to unlock your locked-in RRSP or pension and anyone that is promoting ways to access your RRSP or pension for tax-free cash. Not only can you lose your retirement savings, but you could be unknowingly, and illegally, circumventing tax laws. This could leave you with a hefty tax bill, that may include penalties for violating tax laws.
If you have any concerns regarding any investment opportunities someone presents you regarding your retirement saving’s contact your provincial regulator. Not only can this save you from losing your savings, it could also save you from a messy legal situation.