Redress Risk Management (post until May 31/19)

Voluntary disclosure window closing for unreported Swiss accounts

Canadian taxpayers who have not reported their Swiss bank accounts to the Canada Revenue Agency (CRA) may be running out of time to file a voluntary disclosure, in order to avoid financial penalties or possible criminal prosecution, Toronto tax litigation lawyer David J. Rotfleisch writes on

“Ever since Swiss bank Credit Suisse had to pay USD $2.6 Billion in fines to the U.S. Department of Justice in 2014 due the bank's role in aiding U.S. citizens to evade taxes, Swiss banks in general are taking steps to insulate themselves against future legal action taken by the governments of other developed countries, including Canada,” Rotfleisch, founding tax lawyer at Rotfleisch & Samulovitch Professional Corporation, explains.

He notes that many Swiss banks have sent correspondence over the last year to their Canadian clients requesting confirmation that the client has disclosed the offshore bank account to the CRA.

“This year alone, our Toronto income tax law firm has successfully completed numerous Voluntary Disclosures for clients who contacted our office upon receipt of such letters from their Swiss banks. A Canadian taxpayer who receives such a request can either provide evidence to the Swiss bank that a Voluntary Disclosure to CRA is underway and/or completed, or show that the account has been listed on the taxpayer's T1135 'Foreign Income Verification Statement' form for the most recent taxation year,” says Rotfleisch.

However, he says, some Swiss banks have said that if they do not receive this information from their Canadian clients by Dec. 31, 2015, they will liquidate all bank accounts they hold for the client and mail a cheque to their last known address for the proceeds of the accounts.

The results of such action could have disastrous effects, says Rotfleisch.

“All Canadian ‘reporting entities’, a term which includes banks, are obligated by law to report cash transactions of $10,000 or more to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). Given the fact that CRA has, for the past several years, been investing significant resources in investigating offshore banking and related transactions, depositing a cheque from Credit Suisse for a substantial amount into your Canadian bank account can and will attract attention, and very possibly a full-scale audit, from CRA.”

However, when the CRA initiates an audit, a voluntary disclosure is no longer an option for the taxpayer.

At the conclusion of an audit, the taxpayer could be assessed penalties and interest that can far exceed the actual taxes owing on any unreported income, or, says Rotfleisch, Revenue Canada may seek to have the taxpayer prosecuted for tax evasion.

“It is important that taxpayers with unreported Swiss bank accounts or unreported offshore income consider making a Voluntary Disclosure to CRA as soon as possible. A successfully filed Voluntary Disclosure eliminates the possibility of penalties and criminal prosecution, allows for partial interest relief and, in several cases, enables the taxpayer to limit the years required to qualify as a ‘complete’ disclosure to ten, and possibly fewer, years.”

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