CRA sets new rules for reporting tax planning strategies which target advisors by expanding mandatory reporting rules.
The Trudeau governments position is clear, the Income Tax Act lacks “timely, comprehensive and relevant information on aggressive tax planning strategies.”
Before Trudeau’s revision to the ITA, avoidance transactions had to be reported to the CRA when two (2) of the following applied:
- advisors/promotors are engaged on a contingent-fee arrangement.
- advisors/promotors receive confidentiality protection.
- contractual protection is provided to the taxpayer.
The new rules only require one (1) of the above-mentioned conditions to trigger the CRA reporting requirement. Now every advisor/promotor involved in a reportable transaction are required to make their own separate disclosure to the CRA within 45 days.
Essentially the CRA now requires any transaction that obtains a “tax benefit” instead of an “avoidance transaction” to be reported. Of course, the vague wording means almost any tax planning transaction must now be reported.
Big 3 Tax Avoidance Transactions
- manipulation of Canadian-controlled private corporations (CCPCs)
- loss-straddle transactions created using a partnership.
- avoidance of the 21-year deemed disposition of trust property.
The new rules are set to take effect sometime beginning in 2023, but no concrete date is set.
The Trudeau’s government position is, “The Government of Canada is committed to enhancing the mandatory disclosure rules to facilitate early access to timely, comprehensive and relevant information on aggressive tax-planning strategies.”
More reporting. More costs. More taxes.
This post is a summary of Michael McKiernan’s piece published in the Investment Executive. It’s shorter and easier to read.
Thanks for reading!
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