Penalties Related to the General Anti-Avoidance Rule

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The penalties related to the General Anti-Avoidance Rule (GAAR) are a means of fighting abusive tax planning schemes.

For instance, application of the GAAR can lead to the taxpayer being imposed a penalty equal to 50% of the amount of the eliminated tax benefit.

The penalty system targets both the taxpayer who participates in an abusive tax planning scheme and the person who promotes it. The promoter of an abusive tax planning scheme may be liable to a penalty equal to 100% of the amount he or she received or is entitled to receive from the scheme.

Note

If a transaction was carried out before November 10, 2017, or if it was part of a series of transactions that began before that date and was completed before February 1, 2018, the taxpayer is liable to a penalty equal to 25% of the amount of the eliminated tax benefit. The promoter of the abusive tax planning scheme may be liable to a penalty equal to 12.5% of the amount he or she received or is entitled to receive from the transaction.

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