Tag Archives: Offshore bank accounts

Paradise Papers and the new voluntary disclosures program

sweet-ice-cream-photography-122596On November 5, 2017, a massive leak of financial documents referred to as the Paradise Papers was released to the public. The leak involves multiple jurisdictions and contains nearly 13.4 million confidential electronic documents relating to offshore investment. The Paradise Papers comes largely from Appleby, a law firm based in Bermuda, and from the corporate registries of 19 tax havens.

The Paradise Papers cover the period from 1950 to 2016 and involve over 120,000 people and companies across the world, including government officials, entertainment personalities and corporate giants. It also involves more than 3,000 Canadian individuals and corporations, which is five times more than the ones from the Panama Papers.

On November 3, 2017, just a few days prior to this new leak, the Canada Revenue Agency (the “CRA”) delivered a statement (document) to highlight its work to combat tax evasion and tax avoidance. The CRA stated having “currently more than 990 audits and more than 42 criminal investigations related to offshore underway”, 123 of which involve participants and facilitators named in the Panama Papers. In light of the recent Paradise Papers leak, the CRA already announced that it is reviewing the data and promised to take “appropriate action”.

Furthermore, as part of the CRA’s strategy to combat offshore tax evasion and aggressive tax planning, the CRA announced earlier this year that a revised voluntary disclosures program policy would be introduced in 2018. The proposed changes were initially supposed to be implemented on January 1, 2018, but the CRA is delaying the implementation until March 1, 2018. The formal keys changes confirmed by the CRA will :

  • eliminate the « no-names » disclosure process;
  • require payment of the estimated tax at the time of the application;
  • cancel relief if it is subsequently discovered that the application was not complete due to a misrepresentation; and
  • create a two tracks system by introducing a « General Program » for minor non-compliance and a « Limited Program » for major non-compliance with limited relief in certain circumstances;

Such circumstances could include, for example :

  • Situations where large 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 Paradise Papers data leak; and
  • Other circumstances in which the CRA considers that there was a high degree of guilt in the taxpayer’s conduct contributing to his failure to comply.

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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.

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Swiss accounts : until December 31, 2015 to disclose

The United States came down hard on Swiss banks after receiving, from various whistleblowers, Swiss bank data evidencing U.S. citizens had hidden fortunes in Swiss accounts. Swiss banks were fined billions for assisting U.S. citizens in evading taxes and now want to avoid repetition of this scenario when the exchange of information begins in 2018 with other countries.

The automatic exchange of information between Canada and Switzerland will begin in 2018[i]. Swiss banks have therefore put in place various measures to protect themselves and show, in a near future, that they did all they could to encourage Canadian clients to disclose offshore assets.

Most large Swiss banks have already requested from their Canadian clients evidence that their Swiss accounts are reported in Canada or that a voluntary disclosure has been initiated. This is generally done by having a tax professional confirm to the bank that a disclosure of the account has been filed for the client with the Canada Revenue Agency (CRA).

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Foreign bank account in Israel: Last chance for voluntary disclosure

On March 16, 2015, The Bank of Israel issued an anti-tax evasion directive aimed at avoiding Israeli financial institutions being used by foreign taxpayers to move assets and income offshore, out of reach of the tax authorities of their countries of residence. Israel may now obtain bank information on accounts opened by non-residents and it will begin the process of exchanging tax information with other countries, such as Canada, in 2017.

The directive stipulates that Israeli banks must require their foreign clients to provide them with a declaration containing the following information:

  1. the customer’s country of residence for tax purposes;
  2. confirmation from the client that his or her aggregate investments and assets have been reported to the tax authorities of the resident jurisdiction (e.g., Canada) or, alternatively, a declaration to the effect that he or she has initiated a voluntary disclosure procedure in the resident jurisdiction; and
  3. a waiver from the taxpayer pursuant to which Israeli banks would be allowed to provide confidential bank account information to non-Israeli tax authorities

Israel may disclose the identity of their non-resident clients and report the funds held in their accounts to the tax authorities of their respective countries of residence

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Comptes bancaires en Israël et échange automatique d’information

Le 16 mars dernier, la Banque d’Israël a émis une directive ayant pour objet de contrer l’évasion fiscale internationale et d’éviter que les institutions financières israéliennes ne soient utilisées par certains contribuables étrangers afin de réduire indûment leur fardeau fiscal dans leur pays de résidence.

Cette directive prévoit notamment que les banques israéliennes devront obtenir de leurs clients étrangers une déclaration contenant :

  1. Le pays de résidence fiscale du client;
  2. Une attestation du client à l’effet qu’il a déclaré l’ensemble des investissements et avoirs qu’il détient auprès de l’institution financière israélienne visée aux autorités fiscales de son pays de résidence, ou, alternativement, une déclaration du client à l’effet qu’il a entamé un processus de divulgation volontaire dans son pays de résidence; et
  3. Une décharge du contribuable relativement à la confidentialité de ses informations financières vis-à-vis des autorités fiscales de son pays de résidence.

En d’autres termes, les banques israéliennes s’autorisent à communiquer l’information relative à leurs clients étrangers aux autorités fiscales de leur pays de résidence. Continue Reading »

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