You Can’t Make This Make Sense: How Brookfield Routes Billions Through Bermuda While You Pay CRA Your Full Share

Part 1: What You Can Legally Do

Before we get to the part that will make your blood boil, let’s cover the basics. Here are the legal tax reduction strategies available to any Canadian individual:

• RRSP contributions — Reduce your taxable income dollar-for-dollar up to your contribution limit (18% of earned income, capped at $32,490 for 2025).
• TFSA — Tax-free growth. Annual limit for 2025 is $7,000. Cumulative room since 2009: over $102,000.
• Capital gains — Only 50% included in income (before June 25, 2025) or 66.67% after.
• Incorporation — Small business rate of roughly 9-12% keeps more money inside the company.

That’s essentially everything the tax code offers an individual Canadian to reduce their tax burden. It operates within strict boundaries. Your income is attributed to you. Your residency is where you live.

Part 2: How Brookfield Does It

Brookfield Asset Management is one of Canada’s largest companies, headquartered in Toronto, with over $1 trillion in assets under management. Its executives work in Toronto. Its strategic decisions are made in Toronto.

Yet a significant portion of the fees Brookfield charges to its own investment funds are routed through subsidiaries in Bermuda and the Isle of Man.

1. Brookfield creates an investment fund registered in Bermuda or the Isle of Man.
2. The fund signs a management services agreement with a Brookfield subsidiary also based there.
3. The fund pays management fees (1.25-1.5% of AUM annually) to the Bermuda subsidiary.
4. Bermuda has a 0% corporate income tax. Isle of Man has 0% on most business income.
5. Those fees are taxed at exactly 0%.

If those same fees were paid to a Canadian Brookfield entity, they would face ~26% corporate tax. On $2 billion in annual fees, that’s $540 million in Canadian tax. At 0%, it’s $0.

Part 3: The Contradiction

Brookfield’s tax structure relies on two claims that cannot both be true:

Claim A: The management fees are earned by the Bermuda subsidiary. The value is being produced in Bermuda by Bermuda-based employees. Therefore income should be taxed in Bermuda (0%).

Claim B: Bermuda doesn’t actually tax this income. The entity has a registered address and minimal local staff. The real decision-makers are in Toronto. Economic substance tests would struggle to find value creation in Bermuda.

You cannot have both. If value is created in Bermuda, Bermuda should tax it. But Bermuda doesn’t tax it. If no value is created in Bermuda, the income was earned in Canada and should be taxed in Canada. The structure depends on Canada accepting Claim A while Bermuda operates on Claim B. This is a “stateless” income arrangement.

The Double Standard

If you’re a Canadian consultant who incorporates in Bermuda and invoices your Canadian client from there, CRA will reassess you in about 18 months. They apply GAAR and transfer pricing rules. They say your Bermuda company has no real substance, the value was created where you sit, and the income is taxable in Canada.

Brookfield does the same thing — invoices from Bermuda for services performed by Canadian executives — and it’s legal. CRA audited Brookfield in 2014 and settled for pennies on the dollar. Terms are confidential.

The core unfairness: Ordinary Canadians get a finite list of deductions. Every dollar is tracked and taxed. But a multinational can shift billions in fees to a zero-tax jurisdiction using the exact same arguments CRA rejects when an individual tries them.

Part 4: What Would Fix This?

Canada’s transfer pricing rules (s.247 of the Income Tax Act) and FAPI rules (s.91-95) already allow CRA to reallocate income to Canada. But management fees earned by an active offshore business fall into a grey zone that governments have chosen not to close.

• A clear economic substance test requiring income be taxed where it’s booked, with actual people and premises to justify it.
• End treaty shopping that lets Canadian managers route fees through third countries.
• Public country-by-country reporting so Canadians see what their largest companies pay.

None of these are technically difficult. They are politically difficult because the companies benefiting from the system fund campaigns and employ thousands. The Standing Committee on Finance has studied offshore tax avoidance four times since 2016. Each study produced recommendations. None produced legislation.

In summary: You can contribute to an RRSP. You can use a TFSA. You can incorporate. That’s your legal toolkit. Brookfield can shift billions to Bermuda and pay zero Canadian tax on fees for the same work done in the same Toronto offices. The law treats them differently because they wrote the rules. Try to make it make sense.