Misrepresentation of a tax matter by a third party

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
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