George Nkoke Nnane of Richmond Hill, Ontario, was sentenced in the Superior Court of Justice in Toronto to 4-years in jail for filing fraudulent tax returns, the CRA has reported.
Effective September 18th, 2018, the Ministry of Finance in the province of British Columbia (Canada) has introduced a new version of their property transfer tax return which asks for additional information which could be used by the Ministry of Finance, or the Canada Revenue Agency (CRA) to track condo flippers, or those individuals or businesses who purchase condos and rent them out.
The property tax transfer (PTT) return requires that individuals with a “significant interest” in a corporation or trust that acquires property must be identified, with some exceptions.
If, the purchase is made through a corporation or trust, this new legislation will require property developers to collect a database of pre-sale buyers and remit that list to the BC Government.
The change in the regulations have been implemented to reduce the opportunity for tax evasion and / or money laundering, which are believed to have contributed to the skyrocketing house prices in the province.
The New PTT Return will likely require information on all beneficiaries of certain trusts and corporate interest holders including their name, contact information, tax identifiers (SIN, ITN, BN), and citizenship.
The draft legislation titled the Land Owner Transparency Act is still in the consulting stage and the BC government has stated that the results of the consultations do not affect the new PTT return which came into effect September 17, 2018.
These changes pose real threats to the highly speculative pre-sale condo market in BC, and if successful, will likely be implemented in other large urban centres, such as Toronto, Montreal and then across the country.
In recent years, pre-sale buyers have made out like bandits, securing pre-sale contracts with no proof of funds, without having financing in place, or the ability to secure financing and in many cases these buyers have absolutely no intention of closing upon completion of the condo, instead, flipping the contract to other buyers at a profit, without paying the tax on the gain.
The CRA frowns on buyers who flip condo contracts once a profit has been realized and have cracked down on this process, albeit, not enough, and not just on those who have been taking part. The CRA has also assessed buyers who have legitimately sold their units and who have met all of the requirements for ownership, however it’s much easier for the CRA to determine everyone is guilty than to have to pull the legitimate from the pile of illegitimate.
These contract flippers have been successful because there is no title registration through BC land titles which means the best that the CRA can do is take the developer to court in order to obtain the list of pre-sale buyers who have flipped their contract, or go to court and seek information through a Requirement for Information, but the CRA must have evidence to support their claim that buyers have flipped condo contracts without declaring the capital gain.
All in all, this is just another area where the CRA is tightening up regulations thanks to the BC Ministry of Finance, and we will soon see this process come to an end. In the meantime, there will be a whole bunch of taxpayers who will be assessed by the CRA, and there will be a 50% Gross Negligence penalty attached to that assessment.
Taxpayers who have been assessed by the CRA and who have done nothing wrong, should contact inTAXicating Tax Services at email@example.com, and discuss our strategy for assisting taxpayers.
On June 9th, 2017, the Canada Revenue Agency (CRA) launched a 60-day online consultation with Canadians on the Voluntary Disclosure Program (VDP), in which the CRA is seeking input from the public to ensure that the program is more “responsive, innovative and fairer for all Canadians”.
One of the key asks by the CRA is this question; “We are asking you – when should the VDP apply? Should it apply only to those who knowingly choose to not pay their taxes or also to those who make mistakes on their returns?”
Based on that question, many organizations have been putting out materials stating that the CRA is changing the program and that it is already been decided, however that is not the case, yet, as the consultation period has not even ended.
What Is Voluntary Disclosure?
The Voluntary Disclosures Program (VDP) gives Canadian taxpayers a chance to change a tax return they have previously filed or file a return that should have filed and by making these changes through the VDP, the Canada Revenue Agency (CRA) may give relief from prosecution and penalties.
By applying to the CRA under the VDP, a Canadian taxpayer might only pay the taxes owing plus interest.
The disclosure MUST meet all four of the following conditions to be valid;
1. A penalty would apply
2. It is voluntary, which means it is made before the CRA takes any compliance action against you
3. the information is at least one year overdue
4. it includes all the relevant information – meaning it is full and complete.
Anyone can use the VDP, including individuals, businesses, employers, payers, trusts and estates, whether a resident or a non-resident of Canada.
Why Changes to the VDP?
When the CRA found out that there were Canadian taxpayers hiding money offshore, they began to consider whether the current VDP was fair for all Canadians. Should a taxpayer who forgets to include an income source be granted the same relief as a taxpayer hiding money overseas and failing to disclose that income in order to reduce the amount of taxes they would have to pay in Canada?
The answer clearly is no, it’s not fair, and the CRA wants to change the program to make it easier for actual errors and omissions to be fixed, while making it much more difficult to allow tax evaders to utilize the program to avoid prosecution.
The most meaningful change expected in the VDP is the introduction of a two-track system:
1) the General Program, and
2) the Limited Program.
The Limited Program would limit the availability of the program in certain circumstances or where there is a “major non-compliance” as such relief for penalty and partial interest relief could be seen as “overly generous.”
Under the General Program, taxpayers who qualify for the VDP will not be charged penalties or referred for criminal prosecution with respect to the disclosure, and may be entitled to partial relief for any interest in respect of assessments preceding the three most recent years of returns required to be filed.
Whereas under the Limited Program, applications that disclose “major non-compliance” will not receive the same level of relief as they would under the current VDP. Taxpayers will not be referred for criminal prosecution and will not be charged a gross negligence penalty with respect to the disclosure, however, other penalties will be charged as applicable such as a late filing penalty, a failure to remit penalty, an instalment penalty or an omission penalty. Additionally, no interest relief will be provided.
What Might Constitute “Major Non-Compliance?”
Major non-compliance might look like this:
• Taxpayers who undertook active efforts to avoid detection through the use of offshore vehicles or other means
• Large dollar amounts being disclosed
• Multiple years of non-compliance
• A sophisticated taxpayer, or use of sophisticated tax avoidance techniques under the advice of a sophisticated professional, and
• The disclosure is made the CRA has released information aimed at cracking down on taxpayers failing to disclose all their income
The determination of whether an application should be processed under the Limited Program will be made on a case by case basis.
While determining the status of an application to the VDP, the CRA will also consider;
• If they will require payment in full of the estimated taxes owing as a condition of acceptance
• If transfer pricing cases and applications from corporations with gross revenue in excess of $250 million qualify
• If applications that disclose income from the proceeds of crime will be allowed access to the program
The CRA will continue to cancel VDP applications if they learn that the disclosure was not full and complete, or if was intentionally inaccurate.
The release of the changes to the CRA’s VDP will be announced in the fall, and the above is speculation as to what the new program will look like. If you, or anyone you know has failed to fully or accurately disclosure income, it’s best for them to speak to a professional now, especially before there are changes to the program which might disqualify them.
At inTAXicating, we are always available to discuss the CRA’s VDP and you can find us at http://www.intaxicating.ca, or send us an email to info@inTAXicating.ca.
Another example of how a Ponzi scheme can result in a long-prison sentence and huge fine.
Unfortunately, the “victims” here are the people who took part in this scheme because they still owe taxes plus gross negligence penalties (50%) plus the CRA and the Courts have long considered people who partake in these scams and schemes to have done so knowingly and with full understanding they they are illegal.