Offshore File Leaks Increase Prospect of Tax Audits
Taxpayer information from offshore jurisdictions is being leaked. This means that the Canada Revenue Agency has access to financial information that taxpayers thought was going to be secret or private. One of the most recent leaks is the Bahamas leak of over 175,000 companies registered between 1990 and 2016. Another memorable recent leak was that of the Panama Papers. What is certain is that the world is becoming smaller and information once thought safely out of the hands of local governments is now accessible. The age of safe international tax evasion is over. Whether the information is provided voluntarily by offshore financial institutions and foreign governments under various legal agreements, or involuntarily through leaks, the prognosis for Taxpayers is the same – It is time to come clean about off-shore financial activities and pay taxes evaded.
The news is more concerned with big name tax cheats like politicians, but you can be sure that the Canada Revenue Agency is looking at the small guys as strongly as the big fish. What is troubling is that many Canadians have been duped by unscrupulous investment advisers to not declare amounts and told this was legal. What most people don’t know is that most passive investment income, such as dividends, interest, capital gains, royalties, and the like are taxable in Canada whether or not the money was transferred to Canada. Also, there are reporting obligations when you own foreign property, even if no income is earned or losses are incurred, when certain thresholds are met.
If you happen to be someone who directly or indirectly invested in or transferred money off-shore, and you haven’t reported the existence of the funds or the income from them to the CRA, all is not lost. The CRA offers Tax Amnesty though its Voluntary Disclosure Program for those who come fully clean voluntarily. A Chartered Professional Accountant can help you navigate the maze of the Voluntary Disclosure Program and figure out what your obligations are. If you have any doubts about the legality of your off-shore funds or property, get clarity from a Chartered Professional Accountant.
Time is not on your side. If the CRA gets wind of your off-shore activities before you come clean, you won’t be able to avoid the interest, penalties, and criminal prosecution that the Voluntary Disclosure Program Offers. Interest and penalties can add up to many times the taxes owing and can lead to bankruptcy and loss of life savings. Criminal prosecution can also be financially and personally devastating. Save yourself and your family the headache and heartache by getting the advice of a Chartered Professional Accountant. Rest easy, if you’ve gone wrong or been lead astray, by filing a Voluntary Disclosure. Don’t let your hard work be for nothing.
Disclaimer: Articles are for general information only and do not constitute tax advice. They cannot be relied upon.
Sam Faris is a Toronto-based Chartered Professional Accountant who practices as an independent consultant on high-level Canadian tax matters and handling disputes with CRA.He also published an article recently in the business magazine: HERE.