Penalties

Under subsection 237.1(7.4), every person:

• who files false or misleading information in Form T5001, Application for Tax Shelter Identification Number and Undertaking to Keep Books and Records
• who as a principal or as an agent sells, issues or accepts consideration in respect of a tax shelter before the Minister of National Revenue has issued an identification number

is liable to a penalty that is the greater of:

• $500
• 25% of the greater of:
  • the total of all consideration received or receivable in respect of the tax shelter before the correct information is filed with the minister, or the identification number is issued
  • the total of all amounts stated or represented to be the value of property a person who acquires or invests in the tax shelter could donate to a qualified donee, if the tax shelter is a gifting arrangement and consideration has been received or is receivable before the correct information is filed with the minister, or the identification number is issued

Under subsection 237.1(7.5), every person who fails to:

• file an information return in response to a demand by the CRA
• report in the return :
  • the name, address and either the social insurance number or business number of each participant who acquires or otherwise invests in the tax shelter in the year
  • an amount paid by a participant in respect of the tax shelter

is liable to a penalty that is 25% of the greater of:

1. the total of all consideration received or receivable in respect of a tax shelter from a particular person in respect of whom the required information had not been reported at or before the time that the demand was issued or the return was filed
2. if the tax shelter is a gifting arrangement, the total of all amounts stated or represented to be the value of property that the particular person could donate to a qualified donee

The Income Tax Act provides for third-party civil penalties to deter third parties from making false statements or omissions in relation to income tax or GST/HST matters. The following penalties are directed at ensuring tax compliance and deterring inappropriate behaviour.

Penalties for misrepresentation in tax planning arrangements

Under subsection 163.2(2), a penalty applies to a person who makes or furnishes a statement, participates in making a statement or causes someone else to make or furnish a statement when:

• the person knows or would reasonably be expected to know, but for circumstances amounting to culpable conduct, that it is a false statement, and
• the statement could be used by another person for a purpose of this Act

Under subsection 163.2(3), the penalty for the false statement is:

• if the statement was made in the course of a planning activity or a valuation activity, a minimum of $1,000, to a maximum of the person's total gross entitlements at the time at which the notice of assessment of the penalty is sent to the person
• in any other case, $1,000

Penalties for participating in a misrepresentation

Under subsection 163.2(4), a penalty applies to a person who makes, participates in, assents to or acquiesces in making a statement to, by, or on behalf of someone else when:

• the person knows or would reasonably be expected to know, but for circumstances amounting to culpable conduct, that it a false statement, and
• the statement could be used by or on behalf of the other person for a purpose of this Act

Under subsection 163.2(5), the penalty for the false statement is:

• a minimum of $1,000

to a maximum of whichever of the following amount is less:

• the penalty under subsection 163(2) that the other person would be liable for if the other person made the statement in a return filed for the purposes of the Act and the other person knew that the statement was false
• the total of $100,000 plus the person's gross compensation at the time at which the notice of assessment of the penalty is sent to the person if the statement could be used by or on behalf of the other person

The Canada Revenue Agency can assess a penalty of $100 for each failure if the tax shelter identification number is missing on a form.

If you give an incorrect tax shelter identification number, you may be guilty of an offence and, if convicted, liable to:

• a fine from 100% up to 200% of the cost of the tax shelter interest
• imprisonment up to two years
• both a fine and imprisonment