Canada is now implementing a new international standard for the
automatic exchange of financial account information between tax
administrations referred to as the common reporting standard
("CRS"). Implementation of the CRS in
Canada will result in Canadian financial institutions reporting to
the CRA regarding financial accounts they maintain for
non-residents and certain other reportable persons. It is proposed
that the new CRS requirements take effect starting on July 1,
Previously, the draft CRS legislation released by the Department
of Finance in April 2016 included requirements for the collection
of information identifying reportable persons, including name,
address, residency, taxpayer identification number
("TIN") and date of birth. The 2016
Legislative Proposals now supplement the earlier draft legislation
by introducing a $500 penalty for the failure by a reportable
person to provide their TIN when required.
There are some exceptions to the new penalty. It does not apply
when the reportable person makes an application for a TIN within 90
days of the TIN being requested, as long as the TIN is provided to
the requestor within 15 days of receipt. As well, the new penalty
does not apply if the reportable person is not eligible to obtain a
TIN in the relevant jurisdiction.
The proposed CRS penalty appears to be a strict liability
penalty, since intent is not part of the test in determining
whether the penalty applies. Defenses to the penalty would
therefore generally be limited to factual mistake (i.e. the
assessed taxpayer was not in fact non-compliant) or due
The 2016 Legislative Proposals state that a CRS penalty may be
assessed "at any time". As a result, it would appear that
the normal reassessment period set out in ss. 152(3.1) would not be
applicable to the new penalty. The exclusion of certain
administration and enforcement provisions from proposed ss. 281(4)
means that reportable persons may not claim a refund of a disputed
penalty upon filing a notice of objection. Further, amendments to
s. 225.1 are proposed to add CRS penalties to the list of debts
which are not subject to restrictions on collection.
Absent from the proposed CRS penalty regime is an express
penalty for non-compliance by financial institutions and other
persons required to obtain TINs and file information returns under
the CRS rules. Presumably, the existing ITA penalty regime,
including ss. 162(7), would be sufficient to address failures to
file CRS information returns or to otherwise comply with duties or
obligations imposed under the ITA. Although at $2,500 the maximum
penalty under ss. 162(7) is low compared to other ITA penalties,
ss. 162(7) penalties may become significant if applied cumulatively
to multiple failures.
Certain due diligence requirements are now set out in the ITA
for financial institutions to identify reportable accounts under
the FATCA rules (by which Canada implemented the intergovernmental
agreement with the United States). The 2016 Legislative Proposals
will amend the FATCA due diligence requirements to be consistent
with the due diligence procedures proposed for the common reporting
standard. Generally, however, the new CRS rules will not change the
reporting requirements to the US under the FATCA regime.
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