Note: This blog was written by William Dos Santos,
As part of its continuing drive to clamp down on international
tax evasion and aggressive tax avoidance, on January 7, 2015, the
Federal Government announced the rollout of the Canada Revenue
Agency's (CRA) new Electronic Fund Transfer (EFT) Reporting
EFT Reporting has been with us for some time now, with information
on bank transactions already being provided to the Financial
Transactions and Reports Analysis Centre of Canada (FINTRAC) under
separate crime prevention legislation. FINTRAC requires financial
institutions to report international EFTs in certain cases. The
requirements to complete this reporting falls to "reporting
entities" in Canada, is very wide-ranging and is designed to
capture as much of Canada's financial system as possible.
Reporting Entities include banks, co-operative societies, trust and
loan companies, savings and credit unions, casinos, Crown
corporations and money service businesses which provide foreign
exchange or money transfer services to Canadians.
Moving forward, CRA will now also receive the information provided
to FINTRAC. Reporting entities are required to report on any
international EFTs made by Canadians in excess of $10,000. In
addition, if the total transfers made by a taxpayer within 24 hours
exceeds this $10,000 limit, these transfers are reported as well.
These reports will need to be provided to CRA within five business
days of the transfer. With the addition of this new veritable
treasure trove of information, CRA has been given a powerful new
tool which may be used to identify taxpayers who are at a high risk
for aggressive international tax planning, avoidance or
Canadian taxpayers have long been required to report their
international assets and income through disclosure forms such as
the T1134 Information Return for Controlled and Not-Controlled
Foreign Affiliates, and T1135 Foreign Income Verification
Statement, which have either been filed separately by taxpayers or
have been sent to CRA as part of tax return filings. Failure to
file on time or to correctly disclose information on these forms
may result in significant financial penalties to the taxpayer.
Furthermore, the normal statute of limitation periods may not apply
to these penalties.
With CRA's newly added ability to peer into taxpayer's
affairs, it would not be unexpected to see added scrutiny in the
area of foreign reporting in the years to come. It should however,
serve as some relief to taxpayers that there are already avenues of
recourse in place which allow taxpayers to avoid financial
penalties in instances where they may have not fully complied with
their obligations to report and disclose their foreign income and
The Voluntary Disclosure Program has been in place since January 1,
2005, and allows taxpayers relief from penalties (but not interest
on taxes owing), provided certain conditions are met. As long as
the taxpayer makes a full and complete disclosure to CRA, comes
forward voluntarily, the filing or taxes are over one year late and
financial penalties apply to the infraction, they may receive
relief from penalties. In addition to this, taxpayers may initially
make an anonymous disclosure, but must then provide their identity
to CRA within 90 days of coming forward. Since Voluntary Disclosure
is a one-time chance for a taxpayer to come forward on a specific
issue, it would be critically important for the taxpayer to make a
complete and accurate submission, since failure to do so may result
in a rejection of the application by CRA.
It would be fair to say that these changes in Canada are a
significant development in the ongoing international trend for
countries to gather and share more information on their
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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