Data from the Canada Revenue Agency ("CRA") confirms
that voluntary disclosures ("VDs") of offshore assets,
gains and income hit record levels in 2015. This
proliferation of VDs is attributable to various factors, including
increased public awareness of:
international tax compliance issues through media reports;
the CRA's Offshore Tax Informant Program; and
the imminent automatic exchange of international information
under the common reporting standard.
However, the strongest impetus for the proliferation of offshore
VDs may be the recent letter writing campaign by Swiss financial
institutions, requiring confirmation that their clients are
tax-compliant in their home jurisdiction. Foreign financial
institutions, particularly Swiss-based, are now seeking written
confirmation from Canadian taxpayers' professional advisors
that the taxpayer is, or is becoming, tax compliant in Canada.
Some Canadians are being advised either that their offshore
accounts will be "frozen" or "liquidated" as of
the end of 2015. Having an account liquidated would result in
at least two undesirable consequences. First, liquidating
capital assets would create a taxable event in Canada and,
depending on the extent of unrealized capital gains, the resulting
tax payable could be substantial. Second, the former account
holder receiving back the offshore funds would need to deposit the
funds with another financial institution and, in any case, ensure
appropriate future tax compliance. A substantial receipt of
offshore funds by a Canadian financial institution would
automatically trigger a report to the Financial Transactions and
Reports Analysis Centre of Canada ("FINTRAC"). FINTRAC
routinely supplies the CRA with information from Canadian financial
institutions concerning receipts of offshore funds in excess of
$10,000. The CRA could use this information to commence
Given these developments and the ongoing pressure on
non-compliant Canadian taxpayers to address their historic tax
issues, there is no time like the present to commence a VD.
The CRA's VD program is a tax compliance program allowing
taxpayers to come forward proactively to report past tax
non-compliance. A successful VD results in the waiver of all civil
penalties that could potentially be assessed for the last ten
calendar years, a reduced rate of interest on unpaid tax and the
waiver of any criminal prosecution risk.
There are four criteria for a valid VD. It must:
involve a potential penalty; and
involve information that is more than one year out of
If a VD is not commenced proactively, but rather in response to
any enforcement action by the CRA or another administration or
authority, and that enforcement action would have uncovered the
information being disclosed, the VD would likely be rejected by the
CRA on the basis of not being voluntary. Consequently, any
taxpayers with unreported Swiss accounts, or unreported accounts in
other jurisdictions, should come forward immediately and certainly
no later than the end of 2015 to commence VDs. There is a
high likelihood that as of early 2016 it may be too late. Tardy
taxpayers could find themselves unable to successfully remedy their
tax non-compliance going forward, without facing significant
penalty and potential prosecution exposure.
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.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
The prospect of an internal investigation raises many thorny issues. This presentation will canvass some of the potential triggering events, and discuss how to structure an investigation, retain forensic assistance and manage the inevitable ethical issues that will arise.
From the boardroom to the shop floor, effective organizations recognize the value of having a diverse workplace. This presentation will explore effective strategies to promote diversity, defeat bias and encourage a broader community outlook.
Staying local but going global presents its challenges. Gowling WLG lawyers offer an international roundtable on doing business in the U.K., France, Germany, China and Russia. This three-hour session will videoconference in lawyers from around the world to discuss business and intellectual property hurdles.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).