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Canada

16 September 2013

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New requirements announced for Canadians with offshore property and income

On 25 June 2013, the Minister of National Revenue and the Minister for the Atlantic Opportunities Agency (the Minister) announced the launch of a strengthened Foreign Income Verification Statement (Form T1135), one of the Economic Action Plan 2013 measures to crack down on international tax evasion and aggressive tax avoidance. Starting with the 2013 taxation year, Canadians who hold foreign property with a cost of over CAD 100,000 will be required to provide additional information to the Canada Revenue Agency (CRA). The criteria for those who must file a Foreign Income Verification Statement (Form T1135) has not changed; however, the new form has been revised to include more detailed information on foreign property.

Increased reporting requirements include:

-   the name of the specific foreign institution or other entity holding funds outside Canada;
-   the specific country to which the foreign property relates; and
-   the income generated from the foreign property.

Economic Action Plan 2013 also proposes to extend the reassessment period for a tax year by 3 years if a taxpayer has failed to report income from a foreign property on their income tax return and the Foreign Income Verification Statement (Form T1135) was not filed, late-filed, or included incorrect or incomplete information concerning a foreign property.

In addition to the new filing requirements, Economic Action Plan 2013 proposed other measures to combat international tax evasion and aggressive tax avoidance. These include:

-   the new Stop International Tax Evasion Program;
-   the mandatory reporting of international electronic funds transfers over CAD 10,000 to the CRA; and
-   tstreamlining the judicial process that provides the CRA authorization to obtain information from third parties such as banks.

The creation of a dedicated team to implement these measures and a CAD 30 million investment to target international tax evasion and aggressive tax avoidance was also recently announced by the Minister.

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