Budget 2021: Anti-avoidance rules and taxpayer disclosure

The Budget includes proposals to address perceived anti-avoidance activity and failures by taxpayers to comply with transaction reporting rules.

To address the issue of failure to report, the government will be carrying out a consultation process with respect to the enhancement of mandatory disclosure rules. This consultation will address:

changes to the Income Tax Act's reportable transaction rules;

a new requirement to report notifiable transactions;

a new requirement for specified corporations to report uncertain tax treatments; and

related rules providing for, in certain circumstances, the extension of the applicable reassessment period and the introduction of penalties.

The Canadian tax system also includes rules which govern the tax treatment of transfers of assets between non-arm’s length parties. In the government’s view, strategies have been developed to circumvent such rules. The Budget proposes a number of measures to address such planning, as well as a penalty for those who devise and promote such schemes.

For more budget information, please click here.