If you are a Canadian with offshore property and/or income, be advised that there are new reporting requirements due to changes imposed by the federal government. There have been signs to indicate that they are serious about making people pay.
It is important to note that investments outside the country are not illegal as long as they report them. Canadians who invest outside of the country are in compliance with Canada’s tax laws as long as they report all of the income earned outside Canada.
The Canada Revenue Agency (CRA) launched an Offshore Tax Information Program (OTIP) as part of the agency’s efforts to fight international tax evasion and aggressive tax avoidance. OTIP allows the CRA to make financial awards to individuals who provide information related to major international tax non-compliance that leads to the collection of taxes owing. If the information provided contributes to the collection of federal tax owing, the award amount will be between 5% and 15%, of the federal tax collected related to the international tax non-compliance (not including interest and penalties).
Furthermore, the CRA has introduced the following measures to help combat international tax evasion and aggressive tax avoidance:
- Requiring certain financial intermediaries including banks to report international electronic funds transfers of $10,000 or more to the CRA;
- Extending the normal reassessment period by three years for a taxpayer who has failed to report income from a specified foreign property on their annual income tax return and failed to properly file Form T1135, Foreign Income Verification Statement;
- Revising Form T1135 to provide more detailed information, including the names of specific foreign institutions and countries where offshore assets are located and the foreign income earned on those assets; and
- Streamlining the legal process for the CRA to obtain information concerning “unnamed persons” from third parties, such as banks.
Many foreign financial institutions, including those located in tax havens like Switzerland, are being forced to provide information about accounts held by non-residents by June 2016. This would mean the identity of Swiss account holders domiciled in Canada might be in jeopardy.
It is extremely important to be proactive in the understanding of this complex and rapidly changing regulatory environment.
Correcting Your Tax Affairs Before the CRA Comes to You
Failure to report income from domestic or foreign sources is illegal, and Canadians should know that the CRA actively pursues cases of non-compliance. Tax evasion and aggressive tax avoidance can lead to significant taxes, interest, and penalties. Tax evasion can also lead to fines and/or jail time.
The Voluntary Disclosures Program allows taxpayers to come forward and correct inaccurate or incomplete information or to disclose information that they have not reported during previous dealings with the CRA. Taxpayers may avoid being penalized or prosecuted if they make a valid disclosure.
Contact Barrett Tax Law today for more information.