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Canada Revenue Agency's New and Aggressive Tax Enforcement Powers: How You Can Protect Yourself
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Canada Revenue Agency’s
New and Aggressive Tax
Enforcement Powers How You Can Protect Yourself
Gowlings at a Glance
• One of Canada’s largest
law firms
• Over 750 professionals
across 10 offices
worldwide
• Recognized expertise in
Business Law, Advocacy
and Intellectual Property
Law
2
Gowlings at a Glance
www.gowlings.com
3
New Whistleblower
Rewards to be
Offered by the CRA
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Whistleblower Rewards
• The new Stop International Tax Evasion Program
will allow the CRA to pay individuals with
knowledge of major international tax
non-compliance up to 15% of the federal tax
collected as a result of the information provided
• According to Statistics Canada, Canadian funds in
the world’s biggest tax havens grew to a record
$170 billion in 2012
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Why the Rewards?
• The 15% reward will apply only to tax assessments
or reassessments on international transactions over
$100,000
• The federal government has convicted only 44
people of offshore tax cheating since 2006 and the
total amount of fines levied in that time were $6.8
million (less than the $7.7 million in taxes that were
evaded)
• This new reward system will bring Canada in line
with major countries such as the United States,
Germany and the United Kingdom
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New Reporting
Requirements for
Financial Institutions
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New Reporting Requirements for Financial Institutions
• New reporting requirements will require banks, credit
unions, co-ops, caisse populaires, trust companies,
loan companies and certain Crown agents to report
to the CRA
• Incoming and outgoing electronic funds transfers,
where those transfers are $10,000 or more (same as
reporting standards for FINTRAC - the Financial
Transactions and Reports Analysis Centre of Canada)
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New Reporting Requirements for Financial Institutions
• This needs to be reported to the CRA no later than
five working days after the transfer date
• Reporting will be required as of the start of the 2015
calendar year
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Additional Reporting
Requirements for
Taxpayers with
Foreign Assets
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Additional Reporting Requirements - Foreign Assets
• Currently, individuals, corporations, trusts and
certain partnerships that own specified foreign
investment property costing more than $100,000
must file a Form T1135
• Reassessment period
• Generally, the CRA is prevented from reassessing for
additional tax after the normal reassessment period
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Additional Reporting Requirements - Foreign Assets
• The proposed reassessment period for 2013 and
subsequent taxation years
• The budget proposes to extend the reassessment
period for a taxation year by three years if
• The taxpayer has failed to report income from a specified
foreign property on their income tax return; and
• The Form T1135 was not filed on time by the taxpayer,
or a specified foreign property was not identified, or was
improperly identified, on the Form T1135
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Increasing Relevance
of the Voluntary
Disclosures Program
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Voluntary Disclosures Program (VDP)
• The VDP is a program administered by the CRA that
allows taxpayers to proactively come forward and
disclose any past non-compliance
• If a voluntary disclosure is accepted, only the unpaid
tax must be paid
• Penalties get waived
• Interest assessed on the tax gets reduced
• Any potential criminal prosecution gets waived
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Conditions for a Valid Voluntary Disclosure
• For a voluntary disclosure to be valid, four
conditions must be met
• The disclosure must be voluntary, meaning that it must be
started before any enforcement action from the CRA is
commenced
• The disclosure must be complete, meaning that all
outstanding tax issues must be reported
• There must be a penalty that could be assessed
• The disclosure must include information that is at least one
year past due
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Limits on the Relief Offered Under the VDP
• The CRA only has jurisdiction to grant relief for a
period going back ten years
• Although the scope of the VDP is wide, some tax
filings do not qualify for VDP relief
• For example
• The CRA would not accept income tax returns with no
taxes owing or expected refunds
• “Elections” are not accepted (an election is a provision
in a tax statute that allows a taxpayer to choose or
elect a particular treatment or approach)
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Practical Tips on Completing Voluntary Disclosures
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• Almost always start voluntary disclosures on a
no-names basis, which allows the disclosure to be
started right away
• The CRA will usually grant an extension of at least 30
days; however, if there are too many delays in
completing a disclosure, the CRA may reject it
• Determining how many years to include
• This can depend on what records are available and
whether the taxpayer made any misrepresentation
attributable to carelessness, negligence or wilful
default, or commit any fraud when the tax returns were
filed
Defending Tax
Evasion
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Defending Tax Evasion
• Tax evasion prosecution is a criminal prosecution
• A tax evasion case is prosecuted under section 239
of the Income Tax Act
• There are two possible ways for the prosecution to
proceed
• By summary conviction, which carries a possible penalty of a fine
of not less than 50%, and not more than 200%, of the amount of
the tax that was sought to be evaded and imprisonment for a term
not exceeding two years
• By indictment, which carries a possible penalty of a fine of not
less than 100%, and not more than 200%, of the amount of tax
that was sought to be evaded and imprisonment for a term not
exceeding five years
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Q&A 20
Thank You
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Visit www.gowlings.com
Email: [email protected]
