Canada Signs an Agreement that Makes It Easier for Canada Revenue Agency to Learn About International Assets
The Canadian government has made it easier for the Canada Revenue Agency to learn about offshore assets. By joining forces with international tax jurisdictions, Canada will be able to exchange financial account information more easily and securely with other countries around the world. This will help Canada understand what assets Canadians own overseas and help the CRA catch tax evaders.
The international Multilateral Competent Authority Agreement (MCAA) has been recently signed by representatives from several countries, including India, Australia, Costa Rica, Indonesia and New Zealand in addition to Canada. This brings the total number of jurisdictions agreeing to exchange information in accordance with the MCAA to sixty. Ninety-four have agreed to share information from 2017 onwards. This includes Germany, the United Kingdom and France.
Sharing Financial Information Between Nations
The global standards under this pact place obligations on partners to exchange financial information. The goal of this agreement is to help nations prevent international tax evasion. It helps countries understand and recognize the assets that Canadians are holding abroad. This helps the CRA close tax loopholes and clarify tax rules.
Foreign tax authorities will provide Canada with information on financial accounts in their jurisdiction while Canada will provide corresponding information to these nations. The Common Reporting Standard requires financial institutions in Canada to identify accounts held by non-residents and to report information on these accounts to the CRA.
Canada plans to implement this standard by 2017 and the first exchange of information will happen in 2018.
“The implementation of the Common Reporting Standard is yet another powerful tool to catch tax evaders,” said The Honourable Kerry-Lynne D. Findlay, P.C., Q.C., M.P., Minister of National Revenue. “I am pleased to sign the Multilateral Competent Authority Agreement today and expand Canada’s partnerships with like-minded tax jurisdictions.”
“By ensuring an increasing majority of people are playing by the rules, our Government is deepening Canada’s tax base while simultaneously lowering Canadians’ tax burden.”
This agreement is important for anyone who has assets in other countries and for non-residents who have Canadian financial accounts. Under this information-sharing agreement, the CRA now has access to more information about overseas assets. Therefore, it is crucial that, if you own assets in other countries, you properly disclose this information when filing your taxes. Failing to do so can have the CRA knocking on your door.
This information is important, especially in cities such as Toronto or Vancouver that have large immigrant populations. Many people who have lived in other countries before coming to Canada may have bank accounts or other assets outside of Canada. As such, they may not think of reporting these assets when completing their Canadian income taxes. This latest agreement is a reminder of the importance of doing so as failure to fully and properly disclose these assets on your tax return will expose you to the CRA applying significant penalties and possibly more serious consequences.
The Government of Canada has announced over 90 measures in recent years in order to close tax loopholes and reduce international tax avoidance. These measures include mandatory reporting of electronic money transfers over $10,000 and the creation of a dedicated Offshore Compliance Division.
Information about the Multilateral Competent Authority Agreement Common Standard
This common reporting has been developed by the Organisation for Economic Co-operation and Development (OECD), which is a group that aims to promote policies that improve social and economic well-being around the world. The standard was approved in July 2014 and is endorsed by the G20 and the Global Forum on Transparency and Exchange of Information for Tax Purposes.
This standard has become the global standard for exchanging information to prevent tax evasion. It leads to an international exchange of financial information, including details on balances, interest, dividends and sales from financial assets.
This standard leads to a more simplified and more effective process and lowers costs for all stakeholders when compared to having a variety of inconsistent processes in different nations.