Canadian High Interest Savings Bank Accounts

Found a great way to make alot of money really fast…..Millennium Bank!!!! Located in the Grenadines/St.Vincent area(Near Barbados) they offer GIC's, and Savings Accounts that have the highest rates I've ever seen!!!. Owned by United Trust of Switzerland, the interest earned is tax exempt(They pay no tax down there), the currency is avaliable in Canadian dollars. One small downside to Millennium Bank is that they are NOT FDIC insured, but what are the odds of them going bankrupt? Send over $100,000 at 7.25% for a 5YR GIC and watch that money grow to $136,250!!!!Tax Free!! Visit their website at http://www.mlnbank.com

Questions:

Is this a good bank to invest in living in Canada? Does Revenue Canada consider this Bank as "Foreign Income" even though a T-5 Slip will never be issued to you? How do you claim any interest made from an account there? Or do you need to?

Thanks

Roc,

You have to claim all foreign sources of income on your tax return, including interest from savings accounts. Depending on your personal tax situation, you may be eligible for certain deductions which will reduce the amount of tax payable.

If you don't declare the foreign interest income, will the CRA find out? There is always a possibility given that you can only make deposits with cashier's cheques, bank drafts, wire transfers, etc… all of which leave a paper trail. If you're just a regular investor (i.e. don't transfer millions each month), chances are you'll get lucky as the CRA doesn't have enough staff or resources to check everyone out, but the CRA does do random spot-checks, and if you're unlucky enough to get caught… you better get a good lawyer.

As far as the interest rate, 5.5% is pretty good for a one year GIC, but keep in mind that a lot of these offshore banks have hidden fees that eat into your profits. You really need to do some digging to find out whether they have monthy "maintenance fees", whether they have a special "surcharge" for non-resident accounts, whether they charge fees for incoming wire transfers, etc… and do the math to se eif it's worth the hassle to open an offshore account.

You also mentioned the one thing that keeps me away form these accounts: no deposit insurance. If they go belly up, or even if they give you a hard time when you try and transfer your money out of their accounts, good luck trying to get anything done by telephone. You'll have to hire a local lawyer to go to bat for you, and if you get screwed by the local lawyer, you have no recourse.

I'm sticking with the 4% GIC's available here in Canada.

If it sounds too good to be true, it probably is. I'd stay far, far away. Not because your deposits aren't CDIC insured, that's minor. The problem is the jurisdiction in which they're incorporated and where your deposits are based. If that bank decides to fold, you have little if any legal recourse to recover your money. Or, what happens if there's a coup d'etat in the country? It's all very likely.

Cheers,
Doug