Mandatory Disclosure Reporting
Two new far-reaching filing requirements have been passed into law this year. The new filing requirements are Trust returns for bare trust arrangements (the filing deadline is April 2, 2024) and Mandatory Disclosure Reporting (the filing deadline is 90 days after the arrangement or contract has been entered into).
Please review these new filing requirements carefully and inform us if they apply to you. Mandatory Disclosure Reporting below and Trust returns for bare trust arrangements here.
MANDATORY DISCLOSURE RULES
The mandatory disclosure rules that became effective on June 22, 2023, require J.M.H. Adams Professional Corporation, as an advisor to the taxpayer, the taxpayer, and any other advisors to the transaction(s) to disclose to the Canada Revenue Agency Reportable transactions, Notifiable transactions or Reportable Uncertain Tax Treatments (only for companies with at least $50 million in assets). These transactions must be reported to the Canada Revenue Agency by filing Form RC312 within 90 days of the taxpayer becoming either contractually obligated to the transaction(s) or entering into the transaction.
Reportable Transactions
A reportable transaction or a series of transactions has two conditions:
One of the main purposes of the transaction(s) was to create a tax benefit to the taxpayer and
Have at least one of the following three hallmarks:
Contingent fee arrangement (someone is receiving a fee contingent on the transaction being entered into). The fact that we, as your accountant are owed fees for advising you on the transaction(s) is not considered a contingent fee. However, an investment advisor receiving a fee as a result of you entering into a transaction would be a contingent fee and would have to be reported. The investment advisor, your accountant (assuming they are aware of or should be aware of the transaction), and you are all required to file form RC312. There would be 3 filings of form RC312;
Confidential arrangement (a confidentiality clause is part of the arrangement (other than client/lawyer confidentiality)). If you entered into a severance agreement or an insurance settlement which has a confidentiality clause, the company or insurance provider would have to file form RC312 as well as the accountant (assuming they are aware of or should be aware of the transaction) and you. There would be 3 filings of form RC312; OR
Contractual obligation (a future benefit may be received for no additional cost). An example of a contractual obligation is a warranty or a guarantee that if the Canada Revenue Agency challenged the tax treatment of a transaction the professional fees to defend such tax treatment would be included in the initial fees that the professional charged the taxpayer.
Notifiable Transactions
Notifiable transactions include both transactions that the Canada Revenue Agency has found to be abusive and transactions identified as transactions of interest. These transactions are entered into for the purpose of avoiding or deferring tax with minimal other economic benefit.