Category Archives: Ontario

3 months to Doomsday: Offshore assets & Automatic exchange of information

hourglass-1703330_1280

What is the “automatic exchange of financial information”

In order to increase tax transparency across the globe, the Organisation for Economic Co-operation and Development (OECD) adopted the Common Reporting Standard (CRS) on July 15, 2014. The CRS initiative calls on each participating jurisdiction to obtain information from financial institutions within their country and automatically exchange that information with other jurisdictions on an annual basis. The objective is to increase tax compliance by providing key information to the participating jurisdictions allowing them to identify whether their citizens accurately report their foreign assets and income. However, since the CRS is not constraining, 90 jurisdictions have also signed the Multilateral Competent Authority Agreement (MCAA) on automatic exchange of financial account information. The MCAA provides a mechanism to facilitate the exchange of information in accordance with the CRS. Such information to be disclosed includes the following :

  • The name, address, taxpayer identification number, date and place of birth of each account holder;
  • The account number;
  • The name and identifying number of the financial institution;
  • The account balance or value (including, in the case of a cash value insurance contract or annuity contract, the cash value or surrender value) as of the end of the relevant calendar year or the closure of the account;
  • The total gross amount of interest, dividends and other income generated with respect to the assets held in the account.

Continue Reading »

facebooktwittergoogle_pluslinkedinmail

Actifs étrangers et échange automatique de renseignements : 3 mois avant l’apocalypse

hourglass-1703330_1280

Qu’est-ce que « l’échange automatique de renseignements financiers »?

Afin d’accroître la transparence fiscale à travers le monde, l’Organisation de coopération et de développement économiques (OCDE) a adopté la norme commune de déclaration (NCD) le 15 juillet 2014. L’initiative de la NCD invite les juridictions participantes à obtenir des renseignements auprès des institutions financières de leur pays et à les échanger automatiquement avec d’autres juridictions sur une base annuelle. L’objectif est d’accroître l’observation des règles fiscales en fournissant des renseignements importants aux juridictions participantes afin de leur permettre de déterminer si leurs citoyens déclarent correctement leurs actifs et leurs revenus étrangers.

Cependant, puisque la NCD n’est pas contraignante, 90 juridictions ont également signé l’Accord Multilatéral entre Autorités Compétentes (AMAC) sur l’échange automatique de renseignements financiers. L’AMAC fournit un mécanisme pour faciliter l’échange de renseignements conformément à la NCD. Les renseignements à divulguer comprennent ce qui suit :

  • Le nom, l’adresse, le numéro d’identification du contribuable et la date et le lieu de naissance de chaque titulaire du compte;
  • Le numéro de compte;
  • Le nom et le numéro d’identification de l’institution financière;
  • Le solde ou la valeur du compte (y compris, dans le cas d’un contrat d’assurance comportant une valeur de rachat ou d’un contrat de rente, la valeur de rachat) à la fin de l’année civile concernée ou à la fermeture du compte;
  • Le montant total des intérêts, des dividendes et des autres revenus générés relativement aux actifs détenus dans le compte.

Continue Reading »

facebooktwittergoogle_pluslinkedinmail

Why now is the time to do a voluntary disclosure of foreign assets

money-515058_1920The Canada Revenue Agency’s (the ‘’CRA’’) voluntary disclosures program allows taxpayers who meet certain conditions to correct inaccurate or incomplete information previously submitted to the CRA, or to disclose information not previously reported on their tax form. Under the current voluntary disclosures program, those who make a valid disclosure will be responsible for paying the taxes and reduced interest owing as a result of their disclosure, the whole without penalties or fear of prosecution. However, access to the voluntary disclosures program will be limited in the near future and radical changes will be introduced.

Access to the voluntary disclosures program limited for some and radical changes for others

However, on May 29, 2017, the CRA announced by the way of its Report on Progress that a revised voluntary disclosures program policy would be introduced shortly. The changes sought will tighten the access to the voluntary disclosures program and the relief provided. This announce by the CRA is made after the recommendation from the Standing Committee on Finance to conduct a review of the voluntary disclosures program as part of the strategy to combat offshore tax evasion and aggressive tax planning.

In completing its review of the program, CRA sought input from the Offshore Compliance Advisory Committee (the ‘’OCAC’’). In December 2016, the OCAC released the ‘’Report on the Voluntary Disclosures Program’’ which sets out different recommendations to ‘’improve’’ the program. The main contemplated alterations are to, in certain circumstances :

  1. increase the period for which full interest must be paid;
  2. reduce penalties relief in certain circumstances so that the taxpayers pay more than they would pay if they had been fully compliant; and
  3. even deny relief from civil penalties.

Such circumstances could include, for example :

  • Situations where large dollar amounts of tax were avoided;
  • Active efforts to avoid detection and the use of complex offshore structures;
  • Multiple years of non-compliance;
  • Disclosures motivated by CRA statements regarding its intended focus of compliance, by broad-based tax compliance programs or by the reception of leaked confidential information by the CRA such as the Panama Papers data leak; and
  • Other circumstances in which the CRA considers that the high degree of the taxpayer’s culpability contributed to the failure to comply.

Less certain and more expensive results

If implemented by the CRA, the recommendations of the OCAC would significantly change the current voluntary disclosures program and the result of a disclosure would be more discretionary and expensive. Therefore, taxpayers entertaining the possibility of making a voluntary disclosure may want to act soon as the CRA intends to tighten the criteria for acceptance into the voluntary disclosures program and to be less generous in its application.

For more information about filing a voluntary disclosure download “The Voluntary Disclosures Programs in Canada (And in Québec)“.

facebooktwittergoogle_pluslinkedinmail

[UPDATE] No need to delay rectification applications:  Ontario Superior Court

canada-1578634_1280
[The original post was published on July 25th, 2016 – This is an updated version.]

 

The Ontario Superior Court of Justice’s recent decision in Slate Management Corporation v. Attorney General of Canada[1] indicates that applicants do not have to wait for the Supreme Court of Canada’s pending judgments in two high profile rectification cases before seeking rectification orders.  However, appeals to the Ontario Court of Appeal concerning rectification matters will be held in abeyance until the Supreme Court renders the awaited decisions.

On May 19, 2016, the SCC heard arguments in Jean Coutu Group (PJC) Inc. v. Attorney General of Canada[2] and Attorney General of Canada v. Fairmont Hotels Inc., et al.[3] It is anticipated that the SCC will take the opportunity made available by these cases, the former being from Quebec and the latter being from Ontario, to provide national clarity and direction on the law of rectification.  The case law has been wildly inconsistent across the country since the Ontario Court of Appeal’s landmark decision in Juliar v. Canada (Attorney General)[4], the case that paved the way for rectification to be used to alter completed transactions in order to avoid unintended tax results.  Many in the tax community thought that there would be a moratorium on rectification applications and that those in progress would be held in abeyance until the SCC had spoken.

Addressing this issue directly, Justice Hainey in Slate Management did not accept the SCC’s pending decisions as justification for adjourning the application and proceeded to hear the matter.  He even went so far as to rely on the Ontario Court of Appeal’s decision in Fairmont[5], which is the exact case in which the SCC has reserved judgment.

The issue in Slate Management was straightforward.  The applicant argued that it had intended that its amalgamation of three corporations would achieve a specific tax outcome by using the “tax bump rules” under paragraph 88(1)(d) of the Income Tax Act (Canada).  However, it failed to attain the sought after tax outcome because it undertook the amalgamation in one step instead of sequential amalgamations in two steps.  The question before the Court was whether the applicant had a continuing intention to achieve the tax outcome by using the tax bump rules.  The Court found that, on a balance of probabilities, there was a continuing intention.  The application was allowed and the applicant was awarded $20,000 in costs.

The Attorney General of Canada appealed Justice Hainey’s decision to the Ontario Court of Appeal and immediately made a motion to have the matter held in abeyance until after the Supreme Court delivers the Fairmont and Jean Coutu judgments.  The Court of Appeal agreed and ordered that the appeal be held in abeyance until 30 days following the release of the Supreme Court decisions.[i]

[1] 2016 ONSC 4216 (Commercial List).

[2] Docket number 36505.  Summary of the case.

[3] Docket number 36606.  Summary of the case.

[4] [2001] 4 CTC 45 (Ont. C.A.).

[5] 2015 ONCA 441.

[i] Attorney General of Canada v. Slate Management Corporation (August 30, 2016), Toronto C62491 (Ont. CA).

facebooktwittergoogle_pluslinkedinmail

No need to delay rectification applications: Ontario Superior Court

The recent decision of the Ontario Superior Court of Justice in Slate Management Corporation v. Attorney General of Canada[1] indicates that applicants do not have to wait for the Supreme Court of Canada’s (“SCC”) pending judgments in two high profile rectification cases before seeking rectification orders. Continue Reading »

facebooktwittergoogle_pluslinkedinmail

Panama Papers data leak will prompt more tax audits targeting wealthy Canadians

A huge data leak from a Panama-based law firm has exposed billions in secret, offshore transactions involving multiple political leaders around the world and approximately 350 Canadians with offshore tax haven investments.

Previous leaks of offshore activities have led the Canada Revenue Agency (CRA) to engage in multiple tax audits targeting wealthy Canadians, such as clients of the LGT Bank, the Swiss HSBC Bank, and recently clients of one international accounting firm, just to name a few. This time should be no different. CRA was already instructed to get the leaked data in Panama Papers.

Many OECD-participating countries have engaged in a fight against tax evasion, treaty shopping and base erosion and profit-shifting (BEPS). Combined with the upcoming exchanges of financial information between countries starting in 2017 and 2018, Canada’s “new” offshore tax compliance section since 2013 and the offshore tax informant program (OTIP) rewarding whistleblowers, wealthy Canadians and businesses engaged in aggressive tax planning are more likely than ever to be audited.

In addition, the 2016 Federal budget proposed a plan to “improve tax compliance, prevent underground economic activity, tax evasion and aggressive tax planning,” requiring an investment of $444.4 million over five years to be used by the CRA for:

  • hiring additional auditors and specialists
  • developing robust business intelligence infrastructure
  • increasing audit activities
  • improving the quality of investigative work that targets criminal tax evaders

The expected additional revenue from such measures is $2.6 billion.

To most Canadians, these measures may sound perfectly legitimate. But many taxpayers in the province of Québec will hear a familiar tune that evokes unpleasant memories.

Continue Reading »

facebooktwittergoogle_pluslinkedinmail