D'Amico Family Wealth Management Group Of RBC Dominion Securities Presents Étienne Gadbois and Stephen Solomon from De Grandpré Chait, Lawyers "CRA and RQ in 2015 : You can run but you can’t hide! The positions taken by CRA and RQ have been subject to a great deal of media attention. This presentation will provide an overview of the major GST/QST audit issues as well as an update of the voluntary disclosures programs" Angelo D’Amico Christiana Kavadas Dario Falso Celina Toia FCSI, CIM, CPA, CMA, CGA, CSWP B. Comm. Associate Marketing Consultant Vice President - Portfolio Manager Associate Tel: (514) 878-5049 Tel: (514) 878-5196 Tel: (514) 878-5056 Email: [email protected] Email: [email protected] Email: [email protected] Web : http://www.damicofamilywealthmanagementgroup.ca March 11, 2015 Business Insurance Construction Taxation Real estate Insolvency Litigation Intellectual property Debt recovery CRA AND RQ IN 2015: YOU CAN RUN BUT YOU CAN’T HIDE! Presented by: Étienne Gadbois, lawyer Stephen Solomon, lawyer Your best partner D’Amico Family Wealth Management Group | RBC Dominion Securities Inc. March 11, 2015 Table of Contents 1. Contextualization 2. Voluntary Disclosures 3. GST/QST Issues in 2015: 3.1. Real Estate: Joint Venture Election and Bare Trust Issues 3.2 Construction and Employment Agencies: False Invoicing (or is it?) 3.3 Wholesalers: Sale of Tobacco Products (and other products) to Natives 3.4 Corporate Transactions and Elections 3.5 Application of Serious Offences Provision 4. Where do we stand today? Business Insurance Construction Taxation Real estate Insolvency Litigation Intellectual property Debt recovery 1. Contextualization Your best partner 1. Contextualization 4 1. Contextualization “Here are my 5 tips, both in terms of substance and form, which whilst not a panacea for a successful teaching / learning experience, will hopefully be helpful to anyone teaching law. (1) Law is not in a vacuum, so try to contextualize: court cases, political, economic and social circumstances, media reports, are all useful to explain the law, and allowing students to personally relate to it. […]” 1 Rita de la Feria, Professor of tax law, Durham University 5 1. Contextualization Over the last year: • Impressive media coverage • The Canadian/Quebec governments are intensifying their battle against tax evasion (hiring more auditors in the hopes of obtaining more revenue). • And at the same time… 6 1. Contextualization • The Quebec Ombudsman unveiled its 2013-2014 report on September 18, 2014. The Quebec Ombudsman prevents and corrects errors or injustices committed against any individual or group of individuals in connection with a Quebec government ministry or agency, or an establishment in the health and social services network. His or her actions are therefore neutral, independent, and impartial -all essential qualities in the performance of the Quebec Ombudsman’s duties. According to this report : “The Quebec Ombudsman is aware of the importance of countering fake invoice schemes and under-the-table employment. However, this objective must never result in abusive assessments that make enterprises that have not done business with tax delinquents guilty by association. […] 7 1. Contextualization By requiring businesses to check whether subcontractors have fulfilled their tax obligations, Revenu Quebec imposes a task that is not prescribed by law and that is practically impossible for businesses that subcontract to carry out. […] Revenu Quebec’s tendency to make businesses guilty by association can have heavy consequences for Quebec’s economy. Faced with outrageous assessments, businesses incur hefty costs for defending their case […] Frequently, banks second-guess or even renege on their decision to provide financing, presaging genuine risk of bankruptcy and therefore business closures. […] 8 1. Contextualization In the Quebec Ombudsman’s opinion, Revenu Quebec must diligently use the sweeping powers at its disposal by ensuring that it does not unduly jeopardize the operations and even the survival of these businesses.[…] As soon as Revenu Quebec suspects that a business is part of a fake invoice scheme, special auditing methods are used. The Québec Ombudsman notes that these methods assume from the outset that the business is guilty, a way of thinking that completely violates several basic rights as well as the principles of procedural fairness. In examining complaints during this past year, the Quebec Ombudsman once again determined that collection agents bypassed Revenu Quebec rules and directives in order to get results more quickly. Basic notions, such as the unseizability of certain amounts, were not heeded. In their haste to have payment agreements signed, agents did not take citizens’ ability to pay into account.” [Emphasis added] 9 1. Contextualization « This is so accurate of what is going on to * and other clients/taxpayers. Our country/government is no longer being respectful of its citizens and the treatment of everyone like a criminal by CRA is inexcusable. One can only hope a revolt of some type will make this change ». Extract from an email sent by an accountant, CPA, CA, on September 23, 2014 10 1. Contextualization Introduction of GST – Parliamentary Debates • “So, who is in charge? Who listens to the people of Canada? [...] A serious problem for the people and for the government. What will happen if a massive tax revolt is triggered ? What will the government do when people finally say, "Enough is enough. We do not pay our taxes? What will he do? Unless the government and the Minister of Finance have enough credibility to put this tax in place, they will apply it at their own risks and perils and at the risks and perils of the order in Canada. " House of Commons Debates, 2nd session, 34th parliament, vol. VI, Dec 20-Feb 21, 1989-1990, p. 7599 (Opposition Party) 11 1. Contextualization • Businesses are confused about their obligations regarding ITC/ITR claims. • In light (notably) of the harmonization with the GST/HST/QST, the law should be applied in a similar manner across Canada. • 96% of Canadian businesses are small and medium enterprises. • Registrants are becoming more aware of their rights and recent statistics show that they have been filing more notices of objection compared to last year. 12 Business Insurance Construction Taxation Real estate Insolvency Litigation Intellectual property Debt recovery 2. Voluntary Disclosures Your best partner 2. Voluntary Disclosures 14 PURPOSE OF A VOLUNTARY DISCLOSURE The purpose of a voluntary disclosure is to transparently disclose to the tax authorities the existence of foreign property and income, so that taxes can be paid on the funds brought back to Canada where it can be spent or invested without fear. A voluntary disclosure can also be used to regulate other tax issues, for example, if a taxpayer realizes he failed to report an income or remit a tax in a previous year and does not want to risk getting caught and facing civil penalties of over 50%. TO DISCLOSE or NOT TO DISCLOSE – THAT IS THE QUESTION! YESTERDAY’S LANDSCAPE OF SECRET BANKING (prior to 2010) • Very few people got caught. • No exchange of information between tax havens and Canadian government. • Taxpayer had a choice to make: TO DISCLOSE or NOT TO DISCLOSE. 2010 – Everything began to change Since 2010, several lists containing the names of Canadians with foreign bank accounts were sold by various sources to the government of Canada. With this information, the Canadian government has agressively audited and penalized these taxpayers. In addition, the Canadian government has since instituted programs to help catch taxpayers with foreign holdings. The OECD meeting held on October 28-29, 2014 dealt with the question of transparency and exchange of information for tax purposes. As a result of this conference, over 100 countries, including most tax havens have signed the agreement committing to automatically disclose banking information to the account holder’s country of residence. This free exchange of information will commence on January 1st, 2017 or 2018, depending on the country (see Schedule). These countries are now working together to put an end to secret banking. Schedule Despite the approaching January 1st, 2017 deadline, the Canadian tax authorities may modify its voluntary disclosure program prior to said date. Our voluntary disclosure program is extremely generous when compared to other countries like the U.S.A. Canada may decide to make its program more onerous as the free exchange of information nears. Meaning, the January 1st, 2017 deadline cannot be regarded as the time before which a taxpayer should file a voluntary disclosure. The time is now. TODAY’S LANDSCAPE OF SECRET BANKING • Many more taxpayers getting caught: Stolen client information from banks Whistleblower hotlines Information disclosed in another person’s voluntary disclosure • Countries are beginning to share information with Canada and others will begin shortly, i.e.: Luxembourg Switzerland Jersey Isle of Man Israël Bahamas, etc. TODAY’S LANDSCAPE OF SECRET BANKING • Getting caught is a guarantee. • WHEN? Within the next 12 – 36 months. • Luxembourg, Switzerland, Israël and the Channel Islands have already forced Canadians to file voluntary disclosures as the banks have clearly stated that they will be handing over once ‘secret’ information to the Canadian government. • Recently, additional countries have undertaken to do the same i.e. the Bahamas. TODAY’S LANDSCAPE OF SECRET BANKING The taxpayers who have been caught and penalized by the Canadian government have received tax assessments which range from 90 – 120% of the value of their foreign assets and may be subject to additional penal fines which could reach up to 200% of the taxes owed! This means that these taxpayers have lost all of their foreign assets and still owe additional amounts, mainly due to penal fines, civil penalties and interest. PENALTIES Canadians with foreign property and/or income are obliged to file a T-1135 « Foreign Income Verification Statement » with the Canada Revenue Agency every year.