CRA crackdown on foreign income

The reason that CRA altered the T1135 form in such a dramatic fashion is that CRA is becoming more aggressive in chasing the billions of offshore dollars that are escaping taxation annually, and CRA is introducing better tools to chase those who have (knowingly or unknowingly) not complied with filing requirements.

This shift in CRA requirements comes at a time when international banks are under increasing pressure from countries such as the US and Germany to ensure their clientele are in full compliance with their national tax authorities. For instance, Swiss banks Credit Suisse and UBS, along with Israeli Bank Leumi have all been recent targets of tax authority actions to reveal tax evaders. It is only a matter of time before all banks require their clients to demonstrate that they are compliant with their national tax authority.

The new T1135 form follows the CRA’s new Form T1134 Information Return Relating to Controlled and Not-Controlled Foreign Affiliates. The revised Form T1134 is required for tax years after 2010, and was also altered to require more detailed information on the reporting entity, the form’s certifier, and the reporting entity’s organizational structure.

CRA sent out a letter in December 2014 to certain taxpayers to remind them who needs to file a T1135 form, detailing the potential penalties and prosecution in the process. This letter also contained information about the potential availability of protection from penalties and prosecution through the Voluntary Disclosures Program, discussed below.