Failure to file Canada Foreign Property Returns – #T1135 – Penalties and voluntary disclosure

Introduction – Form T1135 is a “Penalty Jackpot” for the Canada Revenue Agency


To be forewarned is to be forearmed!


On July 14, 2019 the text on the page referenced in the above tweet included:

Penalties
This page provides information (including a table of penalties and frequently asked questions) about penalties for late or improperly filed forms and information returns.
Failing to file
The penalty for failing to file a return is $25 per day for up to 100 days (minimum $100 and maximum $2,500). This penalty does apply to Form T1142.
When failing to file is done knowingly or under circumstances amounting to gross negligence, the penalty is $500 per month for up to 24 months (maximum $12,000), less any penalties already levied. This penalty does not apply to Form T1142.
After 24 months, the penalty is 5% of whichever of the following resulted in the requirement to file the information return, less any penalties mentioned above already levied:
– the cost of the foreign property
– the fair market value of the property transferred or loaned to the trust
– the cost of the shares and indebtedness of the foreign affiliate
– Note – This penalty does not apply to Form T1142.
The CRA may issue a demand to file a return to a person or partnership under subsection 233(1) of the Income Tax Act. If so, and if the person or partnership knowingly or under circumstances amounting to gross negligence fails to comply with the demand, the penalty is $1,000 per month for up to 24 months (maximum $24,000), less any penalties already levied. This penalty does apply to Form T1142.
False statements or omissions
A penalty applies to people who knowingly or under circumstances amounting to gross negligence make false statements or omissions in an information return.
For Form T1142, the penalty is the greater of either:
– $2,500 or
– 5% of whichever of the following the false statement or omission was made about:
– the fair market value of the distributed property or
– the indebtedness
For the other information returns, the penalty is the greater of either:
– $24,000 or
– 5% of whichever of the following the false statement or omission was made about:
– the cost of the foreign property
– the fair market value of the property transferred or loaned to the trust or
– the cost of the shares and indebtedness of the foreign affiliate
Due diligence exception for penalties
The penalty for omissions on Forms T1134 and T1141 does not apply to taxpayers who make diligent efforts to get the requested information and who:
– disclose in the return the unavailability of the information and file the information within 90 days of it later becoming available

A “Table Of Penalties” may be found here.

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