Foreign property reporting: Improvement needed

Chartered Professional Accountants of Canada (CPA Canada) is working with CRA and a stakeholder group to find ways to simplify the reporting, ease compliance, and streamline CRA’s administration.

Since Canada Revenue Agency (CRA) released the latest version of Form T1135 in June 2013, the form’s extensive and complex reporting requirements have raised significant concern (discussed in my earlier blog). Chartered Professional Accountants of Canada (CPA Canada) is working with CRA and a stakeholder group to find ways to simplify the reporting, ease compliance, and streamline CRA’s administration.

While I am reluctant to impose on your time during peak season for tax preparers, this issue is no doubt top of mind for many of you, and we think it is important for you to know about current efforts to resolve these problems.

Fulfilling the Form T1135 reporting requirements raises difficulties for several stakeholder groups, from investment dealers and funds, to taxpayers and tax preparers, to tax preparation software providers. In February, CPA Canada hosted an informal round table forum to engage members of all of these groups to identify common concerns and practical solutions. Following this meeting, CPA Canada and the Investment Industry Association of Canada (IIAC) prepared separate, complementary written submissions to CRA and the Department of Finance Canada (Finance) setting out a series of practical solutions, and a tax software developer made representations to CRA IT professionals directly.

CPA Canada’s submission recommends that CRA and Finance should:

  • clarify the intention of the T1135 reporting requirements and the nature of the tax evasion or avoidance schemes that CRA expects to identify
  • extend the current exception for information reported on T3 and T5 slips to cover T5013 and T5008 reporting
  • address the potential impact on the normal reassessment period of late-filed and amended T1135s and of honest errors
  • introduce a legislated due diligence exception and streamline the process for first-time errors
  • change how marketable securities are valued for purposes of the reporting threshold
  • adopt a standalone electronic filing system for Forms T1135 and provide taxpayers with the options of filing Form T1135 manually and filing the form separately from the related tax return
  • extend the filing deadline for Form T1135 to 15 months following the taxpayer’s year-end
  • formalize a process for regularly engaging the tax, investment and other interested communities in consultations on complex new and revised tax forms

Tax evasion is harmful to the economy, and we welcome the government’s efforts to prevent it. We appreciate that CRA requires information to review potentially abusive tax avoidance strategies. However, CRA and Finance should take care to avoid any measure that could add undue complexity and increase the difficulty and cost for honest taxpayers who make every effort to comply with Canada’s complex tax system.

Read CPA Canada’s submission.

Read IIAC’s submission.

Join in the conversation

Do you have additional ideas for easing the burden of CRA’s foreign reporting requirements? Are there better ways for CRA to achieve its tax enforcement goals?

Post a comment below.

Conversations about Tax is designed to create an exchange of ideas on tax policy and practice developments and issues and their impact on Canadian accountants who practise tax. Comments received can provide helpful input to the public interest advocacy positions developed by the Chartered Professional Accountants of Canada.

About the Author

Gabe Hayos, FCPA, FCA, ICD.D

Vice-president, Taxation, CPA Canada