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CRA is Provided Access to Canadians’ Bank Information

11/03/2015


Note: This blog was written by William Dos Santos, CA

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 regime.

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 evasion.

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 assets.

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 taxpayers.