Mandatory disclosure rules – Overview
Disclosure rules for reporting transactions
Canada’s enhanced mandatory disclosure rules are a set of reporting requirements which received royal assent on June 22, 2023. Enhancements to the rules align with international best practices and aim to better provide the Canada Revenue Agency (CRA) with information to respond to tax risks.
Who may be impacted: individuals, corporations, trusts, partnerships, advisors, promoters or certain non-arm’s length parties.
These rules (Income Tax Act sections 237.3 to 237.5) consist of:
- changes to existing reportable transaction rules
- a new rule to report notifiable transactions
- a new rule to report reportable uncertain tax treatments
- related penalties.
These rules apply to:
- transactions occurring after June 21, 2023, for reportable and notifiable transactions, and
- tax years beginning after 2022 for reportable uncertain tax treatments.
Guidance to the mandatory disclosure rules is available.
Not complying with these mandatory disclosure rules will result in financial penalties and extended reassessment periods.
Reportable transactions
For a transaction to be reportable, it must be an “avoidance transaction”
Definition: Avoidance transaction
“Avoidance transaction” means a transaction if it may reasonably be considered that one of the main purposes of the transaction, or of a series of transactions of which the transaction is a part, is to obtain a tax benefit.
“Tax benefit” means
(a) a reduction, avoidance or deferral of tax or other amount payable under this Act, and includes a reduction, avoidance or deferral of tax or other amount that would be payable under this Act but for a tax treaty,
(b) an increase in a refund of tax or other amount under this Act, and includes an increase in a refund of tax or other amount under this Act as a result of a tax treaty, or
(c) a reduction, increase or preservation of an amount that could at a subsequent time
(i) be relevant for the purpose of computing an amount referred to in paragraph (a) or (b), and
(ii) result in any of the effects described in paragraph (a) or (b); (‘this Act’ refers to the Income Tax Act)
the transaction has one of these three generic hallmarks:
- a contingent fee arrangement
- confidential protection
- contractual protection
When you must disclose a reportable transaction
You must disclose a reportable transaction if you are:
- a person who gets or expects to get a tax benefit
- a person who enters into the reportable transaction for the benefit of the above-noted person
- a promoter or an advisor entitled to a fee for the transaction, or
- a person who does not deal at arm's length with the promoter or advisor and who is entitled to receive a fee for the transaction.
Notifiable transactions
A transaction becomes a notifiable transaction if it is the same or substantially similar to one that is designated by the Minister.
Definition: Substantially similar
(a) includes any transaction, or series of transactions, in respect of which a person is expected to obtain the same or similar types of tax consequences (as defined in subsection 245(1)) and that is either factually similar or based on the same or similar tax strategy; and
(b) is to be interpreted broadly in favour of disclosure.
Notifiable transactions designated by the Minister
The Minister of National Revenue can designate transactions to be notifiable transactions in concurrence with the Minister of Finance.
These transactions are listed on the CRA’s Notifiable transactions designated by the Minister of National Revenue web page.
Subscribe to our electronic mailing list to receive an email when new notifiable transactions are designated by the Minister.
When you must disclose a notifiable transaction
You must disclose a notifiable transaction if you are:
- a person who gets or expects to get a tax benefit
- a person who enters into the notifiable transaction for the benefit of the above-noted person
- a promoter or an advisor, or
- a person who does not deal at arm's length with the promoter or advisor and who is entitled to receive a fee for the transaction.
Reportable uncertain tax treatment
An uncertain tax treatment is a tax treatment used, or planned to be used, in an entity’s income tax filings for which there is uncertainty over whether the tax treatment will be accepted as being in accordance with tax law.
A corporation must report an uncertain tax treatment when all of the following apply:
- It is required to file a Canadian return of income for the taxation year
- It has at least $50 million in assets at the end of the financial year that coincides with the taxation year
- It, or a related corporation, has audited financial statements prepared in accordance with International Financial Reporting Standards or other country-specific Generally Accepted Accounting Principles (GAAP) relevant for domestic public companies (for example, U.S. GAAP)
- Uncertainty in respect of the corporation's Canadian tax for the taxation year is reflected in those audited financial statements
How to disclose and by when
Reportable transactions and notifiable transactions
To make a disclosure
Fill out and submit Form RC312, Reportable Transaction and Notifiable Transaction Information Return.
Deadline
You must submit Form RC312 to the CRA within the earlier of :
- 90 days from the time you entered into the transaction, or
- 90 days from the time you became contractually obligated to enter the transaction.
Reportable uncertain tax treatments
To make a disclosure
Fill out and submit Form RC3133, Reportable Uncertain Tax Treatments Information Return.
Deadline
Submit the form on or before the corporation’s regular tax filing deadline.
Penalties for non-disclosure or late filing
If you do not file Form RC312 or Form RC3133 or you file late, you will be charged penalties.
Reportable and notifiable transaction penalties
| Weekly | Maximum | |
|---|---|---|
| Corporations with assets of $50M or more | $2,000 | The greater of $100,000 or 25% of the tax benefit |
| All other taxpayers (e.g. : individuals, partnerships, corporations, etc.) | $500 | The greater of $25,000 or 25% of the tax benefit |
Promoters, advisors and others directly involved:
- 100% of the fees charged
- plus $10,000
- plus $1,000 per day up to a maximum of $100,000
equals Total penalties owed
Penalties for reportable uncertain tax treatments
$2,000 a week to a maximum of $100,000 (for each uncertain tax treatment)
Reassessment periods
When a Form RC312 or Form RC3133 is not filed, an assessment or reassessment for the respective transaction(s) can be made at any time for up to:
- 4 years after you file, or
- 3 years after you file for Canadian-controlled private corporations and individuals.
Related Information
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