Preventive Disclosure
If you are not required to make a mandatory disclosure but you want to reduce the chance that the general anti-avoidance rule (GAAR) will be applied to a tax planning scheme undertaken by you or a partnership of which you are a member, you can make a preventive disclosure.
If the preventive disclosure form is duly completed by the prescribed deadline, we will have the information necessary to determine whether the GAAR applies to your situation.
Should the GAAR apply, we must make an assessment within three years following the day the notice of original assessment is sent to the taxpayer. This period extends to four years where the taxpayer is a mutual fund trust or a corporation other than a Canadian-controlled private corporation.
Timeframe for making a preventive disclosure
You must make a preventive disclosure no later than the deadline for filing the income tax return, or the information return, for the taxation year or fiscal period, as the case may be, in which the tax planning scheme began.
You can make the preventive disclosure by
- Important
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You must provide the following:
- a complete and detailed description of the facts relating to the tax planning scheme
- a statement of the tax consequences resulting from the transaction
The description of the facts and tax consequences resulting from the planning must be sufficiently detailed so that we can understand and analyze them.
- Note
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We do not apply penalties related to the GAAR if the disclosure form is duly completed and filed by the prescribed deadline.
Voluntary disclosure policy
The voluntary disclosure policy is designed to encourage taxpayers to rectify their tax situation by taking actions that include making a complete and spontaneous disclosure of their omissions.
If you fail to make a preventive disclosure by submitting a duly completed preventive disclosure form by the prescribed deadline, you can make a voluntary disclosure.
In addition, if the GAAR applies to your situation, we will not impose the penalties that would normally apply.
We can make an assessment within six years following the day the notice of original assessment is sent to the taxpayer. This period extends to seven years where the taxpayer is a mutual fund trust or a corporation other than a Canadian-controlled private corporation.