Canada

Canada: Minister announces consultations on changes to the Voluntary Disclosures Program

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The Canadians pay their tax shares and expect a responsive and fair tax system. Unfortunately, some rich Canadians continue to find ways to not pay what they owe, which places an unfair burden for this country.

The Canadian Government and the Canada Revenue Agency (CRA) have taken action by highlighting resources in the highest risky areas, both domestically and internationally. The Minister of National Revenue, Diane Lebouthillier, on 9th of June 2017, announced an online consultation to give Canadians a say about the CRA proposed changes to tighten its Voluntary Disclosures Program.

The proposed changes to the Voluntary Disclosures Program (VDP) follow an extensive review of the program that was completed over the past months in response to the recommendation by the Standing Finance Committee. The proposed changes to the Voluntary Disclosures Program contains:

  • narrowing the criteria of who is eligible;
  • confirming that severe cases of non-compliance do not benefit from the same level of penalty and interest relief;
  • ensuring that requests that reveal proceeds of crime are excluded from relief; and
  • requiring payment of the estimated taxes owing as a condition to qualify for the program.

Voluntary Disclosures Program applies to disclosures relating to income tax, excise tax, excise duties under the Excise Act, 2001, source deductions, GST/HST and charges under the Air Travelers Security Charge Act and the Softwood Lumber Products Export Charge Act, 2006. The CRA’s online consultations on the Voluntary Disclosures Program will be open for 60 days. The CRA will announce changes to the program in the fall of 2017. The Voluntary Disclosures Program gives taxpayers a chance to voluntarily come forward and correct preceding omissions in their dealings with the CRA.

A new guidelines was proposed by the Canada Revenue Agency (CRA) to limit voluntary disclosures program’s use. Large Canadian companies would no longer be allowed to qualify for the program regarding income tax matters according to these proposed changes. But, some relief remains present for GST/HST matters. Additionally, the CRA has proposed to give only reduced relief in some cases. To show the eligibility for the program, taxpayers would have to pay their estimated taxes at the time of submitting an application. The CRA is inviting public comments on its proposed changes on or before 8th of August 2017. The official announcement of the amendments to the voluntary disclosures program would be announced in the fall of 2017, with effect for 2018.

Canada signs OECD Multilateral Treaty on Double Taxation

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Canada has signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (“Multilateral Instrument” or “MLI”).  More than 68 countries, including Canada, signed the Convention on 7 June 2017 at Paris.

The Convention is a key outcome of the OECD/G20 Base Erosion and Profit Shifting (BEPS) project, which aims to offers concrete solutions for governments to close the gaps in existing international tax rules by transposing results from the OECD/G20 BEPS Project into bilateral tax treaties worldwide.

The Convention enables all signatories, inter alia, to meet treaty-related minimum standards that were agreed as part of the Final BEPS package, including the minimum standard for the prevention of treaty abuse under Action 6.

The effective date for MLI depends on the timing of domestic ratification process. However, a Canadian Department of Finance official has taken risks, based on reasonable assumptions regarding the timing of the domestic ratification procedures, that the MLI could enter into force as early as 1st of January 2019 (for withholding taxes) and (for all other taxes) for taxable periods starting after 1st of June 2019 with respect to Canada’s Covered Tax Agreements.

Canada: An arrangement signed with U.S. regarding the exchange of CbC Reports

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The competent authorities of Canada and the United States of America (U.S.), on 7th of June 2017, signed an arrangement on the exchange of Country-by-Country Reports. The information exchanged is subject to the privacy and other provisions of the Convention between the U.S. and Canada with respect to Income and on Capital taxes, signed on September 26, 1980.

The arrangement implements the Country-by-Country (CbC) reporting standard that the OECD developed in connection with the Base Erosion and Profit Shifting (BEPS) Action Plan adopted by the OECD and G20 countries. Country-by-country reports will be exchanged between the Canada Revenue Agency and the U.S. Internal Revenue Service on the global allocation of the income, the taxes paid, and certain pointers of the location of economic activity among tax jurisdictions that multinational enterprise groups operate in. This cooperation will give each tax administration with information to assess high-level transfer pricing and other risks regarding BEPS.

Under the arrangement, the information can be used only to assess high-level transfer pricing risks and risks related to BEPS. Where suitable, it can also be used for economic and statistical analysis. The data from the country-by-country report may be used to make further inquiries into the affairs of multinational enterprise groups in the course of a tax audit and, then, to make adjustments to taxable income.

Country-by country reports will first be exchanged for the fiscal years of multinational enterprise groups that start on or after January 1, 2016. The reports will be exchanged no later than fifteen months after the last day of the fiscal year of the group that the report relates to. However, reports for the 2016 year benefit from an extra three months and need only be exchanged within 18 months.

The information cannot be used as a auxiliary for a detailed transfer pricing analysis of individual transactions and prices based on a full functional and comparability analysis.

Additionally, its arrangement with the U.S., Canada has secured an extensive network of partners to exchange CbC reports with under the Multilateral Competent Authority Agreement on the Exchange of Country-by-Country Reports, signed by over 50 jurisdictions.

Canada: DTA negotiations with Switzerland

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The Finance Department of Canada has declared that negotiations to update its Double Tax Agreements (DTA) with the Swiss Confederation will be held in June 2017. The main objective of this release is to ensure that persons whose interests are affected have an opportunity to inform the Government of any particular issues of double taxation that might be resolved in a tax treaty. The Government is particularly interested in gathering knowledge of any difficulties encountered by Canadians under the German tax system so that these issues might be considered in negotiations. Persons are invited to give their comments regarding this negotiations and send it to the Finance Department.

Canada: DTA negotiations with Germany

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The Finance Department of Canada has declared that negotiations to update its Double Tax Agreements (DTA) with Germany will be held in June 2017. The main objective of this release is to ensure that persons whose interests are affected have an opportunity to inform the Government of any particular issues of double taxation that might be resolved in a tax treaty. The Government is particularly interested in gathering knowledge of any difficulties encountered by Canadians under the German tax system so that these issues might be considered in negotiations. Persons are invited to give their comments regarding this negotiations and send it to the Finance Department.

Canada: Government offers relief to flood-affected taxpayers

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In response to problems caused by the recent flooding across the country, particularly in Quebec and Ontario provinces, the Canadian Revenue Agency (CRA) is making available relief for individuals, businesses, and first responders that are unable to file or pay taxes on time. Taxpayers can make a request for taxpayer relief through online, by using Form RC4288, Request for Taxpayer Relief, or by phoning the CRA. The requests are being considered on a case-by-case basis. Where physical access to the relevant office is not possible taxpayers can make use of the CRA’s online services.

Canada: A record number of Canadian citizens are using electronic filing services

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To deliver the Canadian government’s commitment to Canadian citizens, the Canada Revenue Agency (CRA) continues to expand its offering of online services and the number of online users is increasing. Taxpayers are using the CRA’s online services to submit their income tax and benefit returns. Taxpayers who file online and sign up for direct deposit can receive their tax refund within eight business days. Approximately 90% of Canadian taxpayers are submitting their tax returns online. The auto-fill return is intended to relieve the compliance burden for taxpayers by automatically filling in certain parts of their current and previous-year returns.