New Mandatory Disclosure Rules from the CRA

On June 22, 2023, the Canadian Government’s Bill C-47 received Royal Assent, and with it came new mandatory disclosure requirements impacting financial professionals, lawyers, taxpayers, as well as other potential parties.

These new disclosure requirements expand the Income Tax Act (Canada)’s reportable transaction rules, while at the same time reducing the reporting deadline and introducing new related penalties.

The broad nature of these expanded requirements—along with the fact they’re relatively new—has meant tax planning professionals are still developing clarity around compliance and CRA expectations. The CRA has been regularly updating a Guidance webpage over the last few months, though again, this developing content is a guide and not yet comprehensive.

Below are a few key aspects of the new requirements, as of December 1, 2023:

• All parties associated with a transaction are obligated to report the transaction if it can be reasonably concluded that of the main goal of the transaction is to obtain a tax benefit and meets one of the three generic hallmarks – contingent fee arrangements, confidential protection or contractual protection. These hallmarks have, so far, been defined mainly by CRA advising of circumstances that are not considered to be included, leaving the taxpayer unclear on their breadth.
• All involved parties are obligated to report within 90 days of entering into the transaction or becoming contractually obligated to enter the transaction
  • This includes any taxpayers taking part in the transaction, anyone entering the transaction on behalf of a taxpayer, advisors, and legal professionals (clerical parties are not obligated to report)
• Non-compliance penalties for each party associated with a transaction can reach $100,000 or more, depending on the circumstances of the transaction

For more information on these new requirements, please see Boughton’s Tax Practice Area.