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Ottawa, March 5, 1996
1996-015
Draft Foreign Reporting Requirements Released
Related documents:
- Overview of information returns with respect to foreign property.
- Draft Amendments on Information Returns (Adobe Acrobat Version - 99,822 bytes).
Finance Minister Paul Martin and Revenue Minister Jane Stewart today jointly released draft legislation to implement the new foreign reporting requirements announced in the February 27, 1995 budget. Also released are drafts of the information returns that will be required to be filed under these new rules.
Mr. Martin noted that the new reporting requirements signify the government's commitment to preserve the integrity of the Canadian income tax base, particularly with respect to the use of foreign tax havens by Canadians.
"These reporting requirements will give Revenue Canada more ability to scrutinize offshore investments held by Canadians and to ensure the complete reporting of income," Mr. Martin said.
"It would be unfair to Canadians if we allowed some in our society to hide financial assets offshore to avoid paying their fair share of taxes," said Minister Stewart. "We will make sure that all Canadians report income earned outside the country."
The new reporting obligations will require taxpayers with interests in foreign property (shares, bank accounts, real property, etc.) in excess of $100,000 to report and provide details on such holdings. Taxpayers with foreign affiliates will have to provide additional financial and tax information with respect to each affiliate. Beneficiaries of certain non-resident trusts will also be required to file an information return for the year in which they receive a distribution from the trust. In addition, persons who have transferred or loaned property to a non-resident trust will generally be required to file an annual information return in respect of the trust. Failure to comply with these requirements will result in the imposition of substantial penalties.
The proposed amendments are being released in draft form, together with an overview, explanatory notes and the draft information returns, to provide taxpayers and their advisors an opportunity to consider and comment on the proposals. In addition, the release at this time should give taxpayers sufficient opportunity to comply with the new reporting requirements. It is anticipated that these measures will be included in a bill to be introduced later this year.
References to "Announcement Date" in the draft legislation and explanatory notes should be read as referring to today's date.
Draft information returns are available on Internet at http://www.revcan.ca or on Revenue Canada's E.D.D.S.
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For further information:
Brian Bloom
Tax Legislation Division
Department of Finance
(613) 992-5634
Martine Lemire
Tax Legislation Division
Department of Finance
(613) 992-3031
Alain Castonguay
Business Income Tax Division
Department of Finance
(613) 992-1288
Gary Howse
International Tax Directorate
Revenue Canada
(613) 952-8749
Overview of information returns with respect to foreign property
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| Interests in Foreign Property | Foreign Affiliates | |
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| Form | T1135 | T1134 |
| Reference in Income Tax Act | Draft section 233.3 | Draft section 233.4 |
| Who must file? | Persons or partnerships which own specified foreign property, the total cost of which exceeds $100,000. | Where a corporation or trust is a foreign affiliate of a person resident in Canada or partnership, the person or partnership is required to file a return in respect of the affiliate. |
| When must return be filed? | Partnership filers must file by the deadline for partnership returns in section 229 of the Regulations. All other filers must file by their normal tax filing deadlines. (But the first filing deadline is April 30, 1997 or later.) | Same as for form T1135, except that first filing deadline is December 31, 1997 or later. |
| Total minimum penalty for failure to file a return | $12,000 ($500 per month for up to 24 months) |
$12,000 ($500 per month for up to 24 months) |
| Additional penalty for failure to file for more than 24 month | 10% of the total cost of the foreign property, minus penalty otherwise determined. | 10% of the total cost amount of the filer's cost of shares or debts issued by the foreign affiliate, minus the penalty otherwise determined. |
| Main Exclusions | Information in respect of foreign affiliates, property used exclusively in an active business, personal-use property, and property in RRSPs, RRIFs and registered pension plans. | |
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| Transfers and Loans to a Foreign Trust | Distributions from Foreign Trusts | |
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| Form | T1141 | T1142 |
| Reference in Income Tax Act | Draft section 233.2 | Draft section 233.5 |
| Who must file? | A person who has transferred or loaned any amount to the by a partnership of which the person was a member. In addition, any person whose controlled foreign affiliate has transferred or loaned any amount to the trust or a controlled foreign affiliate of the trust. | Persons or partnerships who received distributions from, or who are indebted to, foreign trusts in which they are beneficially interested. |
| When must return be filed? | By the normal tax filing deadline for the filer. (But, first filing deadline is April 30, 1997 or later.) | Same as for form T1135. |
| Total minimum penalty for failure to file a return | $12,000 ($500 per month for up to 24 months) |
$2,500 ($25 per day for up to 100 days) |
| Additional penalty for failure to file for more than 24 month | 10% of the amount transferred or loaned, minus penalty otherwise determined. | Not applicable |
| Main Exclusions | Information in respect of specified foreign pension plans and specified foreign mutual fund trusts. | Reporting not required for distributions from, or debt owed to, a trust in respect of which Forms T1134, T1135 or T1141 have been filed by the filer. |
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| Last Updated: 2004-03-21 |
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