{"id":6653,"date":"2023-07-13T13:07:58","date_gmt":"2023-07-13T20:07:58","guid":{"rendered":"https:\/\/www.thor.ca\/?post_type=tax_alert&#038;p=6653"},"modified":"2025-02-21T12:17:18","modified_gmt":"2025-02-21T20:17:18","slug":"cra-publishes-detailed-guidance-documents-relating-to-new-mandatory-disclosure-rules","status":"publish","type":"post","link":"https:\/\/www.thor.ca\/blog\/2023\/07\/cra-publishes-detailed-guidance-documents-relating-to-new-mandatory-disclosure-rules\/","title":{"rendered":"CRA publishes detailed guidance documents relating to new mandatory disclosure rules"},"content":{"rendered":"<p>The CRA has published two separate documents relating to the new and expanded mandatory disclosure rules, which became law on June 22, 2023. For discussion of those rules, see our previous <a href=\"https:\/\/www.thor.ca\/tax-alerts\/new-expanded-mandatory-disclosure-rules-become-law\/\">tax alert<\/a> and <a href=\"https:\/\/www.thor.ca\/blog\/2023\/01\/notifiable-transactions-practice-issues-ethical-considerations-and-constitutional-dimensions\/\">blog post<\/a>.<\/p>\n<p>The first new CRA document is an \u201c<a href=\"https:\/\/www.canada.ca\/en\/revenue-agency\/programs\/about-canada-revenue-agency-cra\/compliance\/mandatory-disclosure-rules-overview.html\">Overview<\/a>\u201d that provides a high-level description of the mandatory disclosure rules and summarizes how to make a disclosure. The second is a more detailed \u201c<a href=\"https:\/\/www.canada.ca\/en\/revenue-agency\/programs\/about-canada-revenue-agency-cra\/compliance\/mandatory-disclosure-rules-overview\/guidance-document.html\">Guidance<\/a>\u201d page that describes the background of the disclosure rules and the CRA\u2019s planned administrative approach. While not legally binding, the CRA\u2019s administrative publications can be useful for compliance purposes.<\/p>\n<p>In the Guidance, the CRA outlines its interpretation of the three \u201challmarks\u201d that determine whether a transaction is \u201creportable\u201d under the expanded reportable transaction rules (see our previous <a href=\"https:\/\/www.thor.ca\/tax-alerts\/new-expanded-mandatory-disclosure-rules-become-law\/\">tax alert<\/a> for a description of those hallmarks). Among other things, the Guidance states that the following would not generally constitute a \u201challmark\u201d for purposes of the reportable transaction rules:<\/p>\n<ul>\n<li>standard price adjustment clauses (as contemplated in Income Tax Folio S4-F3-C1, <em>Price Adjustment Clauses<\/em>);<\/li>\n<li>normal professional liability insurance of a tax practitioner; and<\/li>\n<li>certain forms of contractual protection that the CRA refers to as \u201cinsurance\u201d that is integral to the arm\u2019s length acquisition of a business at a price that accounts for pre-sale tax liabilities of the business (assuming the \u201cinsurance\u201d is obtained primarily for purposes other than to obtain a tax benefit), such as:\n<ul>\n<li>tax insurance of section 116 risks;<\/li>\n<li>contractual protection in respect of certain pre-sale safe income planning;<\/li>\n<li>indemnities relating to pre-closing tax issues or the amounts of existing tax attributes; and<\/li>\n<li>paragraph 88(1)(d) bump denial protection covenants and indemnities in respect of acquisition by public companies.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>The CRA cautions that it would consider certain forms of contractual protection to be \u201challmarks\u201d if they cover \u201cspecific identified tax risks\u201d. It is unclear what the CRA means by \u201cspecific identified tax risks\u201d.<\/p>\n<p>In the Guidance, the CRA provides examples of certain contingent fee arrangements that it would not view as a \u201challmark\u201d. Notably, the examples in the Guidance go beyond those previously given by the Department of Finance in the Explanatory Notes for the new mandatory disclosure rules, and include certain fee arrangements contingent on the number of returns prepared and fees for the preparation of tax returns that result in a taxpayer obtaining a tax refund.<\/p>\n<p>The Guidance also discusses the new \u201cnotifiable transaction\u201d rules and legislated exceptions but much of the commentary merely describes the legislation or restates portions of the Explanatory Notes previously issued by the Department of Finance.<\/p>\n<p>Further, the Guidance attempts to clarify certain aspects of the new reportable uncertain tax treatment rules, including: when a tax treatment must be reported, how to convert other currencies into Canadian dollars for reporting purposes, and how the rules apply to different accounting methods, partnerships, and consolidated groups.<\/p>\n<p>As of the date of publication, neither the \u201cOverview\u201d nor the \u201cGuidance\u201d webpage identifies any transactions or series of transactions that have been designated as notifiable for the purposes of the \u201cnotifiable transaction\u201d rules. The relevant disclosure forms \u2013 an updated Form RC312 in respect of notifiable and reportable transactions and new Form RC313 in respect of reportable uncertain tax treatments \u2013 are also still forthcoming. Finally, the CRA expressly cautions that its approach to the updated mandatory disclosure rules will develop over time.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The CRA has published two separate documents relating to the new and expanded mandatory disclosure rules, which became law on June 22, 2023. For discussion of those rules, see our previous <a href=\"https:\/\/www.thor.ca\/tax-alerts\/new-expanded-mandatory-disclosure-rules-become-law\/\">tax alert<\/a> and <a href=\"https:\/\/www.thor.ca\/blog\/2023\/01\/notifiable-transactions-practice-issues-ethical-considerations-and-constitutional-dimensions\/\">blog post<\/a>.<\/p>\n<p>The first&hellip;<\/p>\n","protected":false},"author":10,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[53],"tags":[],"class_list":["post-6653","post","type-post","status-publish","format-standard","hentry","category-tax-alerts"],"_links":{"self":[{"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/posts\/6653","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/comments?post=6653"}],"version-history":[{"count":1,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/posts\/6653\/revisions"}],"predecessor-version":[{"id":7248,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/posts\/6653\/revisions\/7248"}],"wp:attachment":[{"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/media?parent=6653"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/categories?post=6653"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/tags?post=6653"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}