Mandatory disclosure rules – Overview

Disclosure rules for reporting transactions

Canada’s enhanced mandatory disclosure rules are a set of reporting requirements which received royal assent on June 22, 2023. Enhancements to the rules align with international best practices and aim to better provide the Canada Revenue Agency (CRA) with information to respond to tax risks. 

Who may be impacted: individuals, corporations, trusts, partnerships, advisors, promoters or certain non-arm’s length parties.

These rules (Income Tax Act sections 237.3 to 237.5) consist of:

• changes to existing reportable transaction rules
• a new rule to report notifiable transactions
• a new rule to report reportable uncertain tax treatments
• related penalties.

These rules apply to:

• transactions occurring after June 21, 2023, for reportable and notifiable transactions, and
• tax years beginning after 2022 for reportable uncertain tax treatments.

Guidance to the mandatory disclosure rules is available.

Not complying with these mandatory disclosure rules will result in financial penalties and extended reassessment periods.

Reportable transactions

For a transaction to be reportable, it must be an “avoidance transaction”

• • Definition: Avoidance transaction

    “Avoidance transaction” means a transaction if it may reasonably be considered that one of the main purposes of the transaction, or of a series of transactions of which the transaction is a part, is to obtain a tax benefit.

    “Tax benefit” means

    (a) a reduction, avoidance or deferral of tax or other amount payable under this Act, and includes a reduction, avoidance or deferral of tax or other amount that would be payable under this Act but for a tax treaty,

    (b) an increase in a refund of tax or other amount under this Act, and includes an increase in a refund of tax or other amount under this Act as a result of a tax treaty, or

    (c) a reduction, increase or preservation of an amount that could at a subsequent time

    (i) be relevant for the purpose of computing an amount referred to in paragraph (a) or (b), and

    (ii) result in any of the effects described in paragraph (a) or (b); (‘this Act’ refers to the Income Tax Act)

• the transaction has one of these three generic hallmarks:

  • a contingent fee arrangement
  • confidential protection
  • contractual protection

When you must disclose a reportable transaction

You must disclose a reportable transaction if you are:

• a person who gets or expects to get a tax benefit
• a person who enters into the reportable transaction for the benefit of the above-noted person
• a promoter or an advisor entitled to a fee for the transaction, or
• a person who does not deal at arm's length with the promoter or advisor and who is entitled to receive a fee for the transaction.

Notifiable transactions

A transaction becomes a notifiable transaction if it is the same or substantially similar to one that is designated by the Minister.

Notifiable transactions designated by the Minister

The Minister of National Revenue can designate transactions to be notifiable transactions in concurrence with the Minister of Finance.

These transactions are listed on the CRA’s Notifiable transactions designated by the Minister of National Revenue web page.

Subscribe to our electronic mailing list to receive an email when new notifiable transactions are designated by the Minister.

When you must disclose a notifiable transaction

You must disclose a notifiable transaction if you are:

• a person who gets or expects to get a tax benefit
• a person who enters into the notifiable transaction for the benefit of the above-noted person
• a promoter or an advisor, or
• a person who does not deal at arm's length with the promoter or advisor and who is entitled to receive a fee for the transaction.

Reportable uncertain tax treatment

An uncertain tax treatment is a tax treatment used, or planned to be used, in an entity’s income tax filings for which there is uncertainty over whether the tax treatment will be accepted as being in accordance with tax law.

A corporation must report an uncertain tax treatment when all of the following apply:

• It is required to file a Canadian return of income for the taxation year
• It has at least $50 million in assets at the end of the financial year that coincides with the taxation year 
• It, or a related corporation, has audited financial statements prepared in accordance with International Financial Reporting Standards or other country-specific Generally Accepted Accounting Principles (GAAP) relevant for domestic public companies (for example, U.S. GAAP)
• Uncertainty in respect of the corporation's Canadian tax for the taxation year is reflected in those audited financial statements

How to disclose and by when

Reportable transactions and notifiable transactions

To make a disclosure

Fill out and submit Form RC312, Reportable Transaction and Notifiable Transaction Information Return.

Deadline

You must submit Form RC312 to the CRA within the earlier of :

• 90 days from the time you entered into the transaction, or
• 90 days from the time you became contractually obligated to enter the transaction. 

Reportable uncertain tax treatments

To make a disclosure

Fill out and submit Form RC3133, Reportable Uncertain Tax Treatments Information Return.

Deadline

Submit the form on or before the corporation’s regular tax filing deadline.

Penalties for non-disclosure or late filing

If you do not file Form RC312 or Form RC3133 or you file late, you will be charged penalties.   

Reportable and notifiable transaction penalties

Promoters, advisors and others directly involved:

Penalties for reportable uncertain tax treatments

$2,000 a week to a maximum of $100,000 (for each uncertain tax treatment)   

Reassessment periods

When a Form RC312 or Form RC3133 is not filed, an assessment or reassessment for the respective transaction(s) can be made at any time for up to:

• 4 years after you file, or
• 3 years after you file for Canadian-controlled private corporations and individuals.

Related Information

• Mandatory disclosure rules – Guidance