Mandatory Disclosure of Certain Transactions
The presence of two key elements in the contractual relationship between a taxpayer (or a partnership of which the taxpayer is a member) and an adviser is indicative of a possible aggressive tax planning (ATP) scheme:
- an undertaking of confidentiality regarding a tax planning strategy that results in a tax benefit or affects income; and
- remuneration for the adviser that is conditional on or proportional to a tax benefit obtained.
Likewise, the presence of contractual protection, that is, insurance or other protection offered to the taxpayer against certain consequences of a tax planning scheme, is also indicative of a possible ATP scheme.
If either of the first two elements listed above are provided for in the contract between you and your adviser, or if you have contractual protection, you must disclose any transaction or series of transactions that, for a taxation year or fiscal period:
- results in a tax benefit of $25,000 or more for you; or
- affects your income (or that of the partnership of which you are a member) by $100,000 or more.
You must make a mandatory 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 benefit was realized or there was an impact on the income.
You must make your mandatory disclosure by completing form TP-1079.DI-V, Mandatory or Preventive Disclosure of Tax Planning.
You must provide the following:
- a complete and detailed description of the facts relating to the tax planning scheme; and
- 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.
Penalties may be imposed if you fail to meet the prescribed deadlines.
When we receive a duly completed mandatory disclosure form and the general anti-avoidance rule (GAAR) applies, we must make an assessment within three years following the day the notice of original assessment is sent. The deadline is extended to four years, however, where the taxpayer is a mutual fund trust or a corporation other than a Canadian-controlled private corporation.
We do not apply penalties related to the GAAR when a mandatory disclosure form is duly completed and filed by the prescribed deadline.