Disclosing reportable transactions
Did you know?
Reportable transactions must be disclosed to the Canada Revenue Agency (CRA).
What is a reportable transaction?
A reportable transaction is a specific type of tax avoidance transaction or, in other words, any transaction undertaken alone or as part of a series of transactions in order to avoid paying taxes. It has to meet at least two of the following three criteria:
- The promoter or advisor for the transaction is entitled to a fee that is based on:
- the amount of the tax benefit;
- getting the tax benefit;
- the number of people participating, or who have been provided access to advice from the promoter or advisor about the tax consequences.
- The promoter or advisor for the transaction obtains “confidential protection,” which is any arrangement that prohibits you from disclosing the details or structure of the transaction to any person.
- You or the person who entered into the transaction on your behalf, or the promoter or advisor have or had “contractual protection.” This is any form of protection against failure of the transaction or that pays for any expense (including tax, interest, penalty, or a similar amount) that may be incurred during a dispute about the tax benefit.
Who must disclose reportable transactions?
If you enter into a reportable transaction for yourself or for the benefit of another person, you must report the transaction. Promoters and advisors are also required to report the transaction.
What is the process for reporting a transaction?
Whether you are an individual, corporation, trust, or partnership, you have to file an information return with the CRA. File Form RC312, Reportable Transaction Information Return, on or before June 30 of the calendar year following the calendar year in which the transaction first became a reportable transaction. This form is filed separately from your income tax return and any other information return.
What are the consequences of not reporting a transaction?
- Penalty: If you or a person representing you does not file a Form RC312 when required, you and each person who has to file this form will be liable to pay a penalty, even if everyone agreed about who was going to file the form. The amount of the penalty is equal to the total of all the fees for the transaction that the promoter or advisor is entitled to receive.
- Suspension of the tax benefit: In addition to the penalty, the tax benefit resulting from the reportable transaction will be denied until the required Form RC312 has filed and the penalty and interest have been paid.
- Extended reassessment period: If Form RC312 has not been filed as required, the period that the CRA can reassess your information return is extended by three years after the date that the information return has been filed.
For more information, see the 2013 fact sheet “New reporting requirements: reportable transactions” or the RC312 Reportable Transaction Information Return.
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