When a Canadian taxpayer ceases to be a resident of Canada, he is deemed to have disposed of each property owned by him at fair market value. He is then deemed to have reacquired his property at fair market value. In other words, the taxpayer potentially owes « departure tax », usually taxes on capital gains. There are, however, many exclusions and ways to mitigate the effect of this rule.
The Bankruptcy and Insolvency Act (BIA) provides for several different situations for which a bankrupt can be discharged from his or her bankruptcy, the basic principle being that after a certain period of time, the bankrupt earns the right to be discharged from his legal obligations to pay his debts and resume normal life. There are exceptions and variables to this principle.
In order to address the issue of offshore tax evasion, the Canadian federal government signed an automatic exchange of tax information agreement (AEOI) with the Swiss government. This agreement will see the two countries automatically share bank account/financial account information with each other. The target bank accounts are those held by residents of the other country. The purpose is to help the Canadian government detect and address cases of tax evasion and to ensure compliance with Canadian tax laws.
Asset protection trusts
As asset protection trust is a type of trust whereby the beneficiaries’ interest in the trust is not fixed but dependent on the discretion of the trustees.
The Canada Revenue Agency sometimes uses a basis of accounting known as net worth to assess, calculate and issue assessments against certain taxpayers.
The net worth basis of accounting consists of determining the amounts a taxpayer would have omitted to report, by proceeding with an analysis of his assets, year after year.
Even if a taxpayer’s objection is denied by objections officers of Canada Revenue, he still has the right to appeal to the Tax Court of Canada.
When a taxpayer is in disagreement with an assessment issued by taxation authorities, he has the right to contest such assessment before the administrative courts of the various taxation authorities. It is sort of an administrative appeal.
In case of Tax evasion or dodging or of unreported work, various laws provide for the imposition of large penalties and even criminal prosecution before the Courts, resulting in very important fines and even imprisonment.
When a taxpayer neglects to file his income and/or other tax returns, taxation authorities issue arbitrary assessments based on existing data that is more or less accurate.
While taxation authorities have full powers to issue arbitrary assessments, it appears that such assessments are often wrong and higher, in favour of such taxation authorities.
In such case, it is in a taxpayer’s best interest to immediately file the missing returns and undertake the necessary discussions in order to remedy the situation.
The Canada Revenue Agency is required by law to give a taxpayer a complete copy of his tax file.
It is true that under various laws respecting access to information, taxation authorities have the obligation to cooperate and to provide your file information to you. Many taxpayers are not aware of these provisions; however, they are of essential importance in a tax dispute.