The Income Tax Act (“ITA”) requires persons and partnerships to file information returns in respect of foreign property ownership and transactions with non-residents. This extends to trusts and estates. Those who file such a return late or do not file one on demand are liable to a penalty or penalties. Generally speaking, a penalty starts at a minimum of $100 to a maximum of $2,500, if over 100 days late. If the filing is late by 24 months or longer and/or the late reporting is deemed to be the result of willful negligence or misrepresentation, then the penalty is assessed as a % of the fair market value of the assets being reported on. These are not insignificant penalties.

Are there any time limitations that would preclude the Canada Revenue Agency (“CRA”) from assessing these penalties?

The ITA prevents the CRA from assessing or reassessing a taxation year beyond the normal reassessment period unless one of the exceptions in that subsection applies. The subsection defines the normal reassessment period as the period that ends four years after the earlier of the day of sending a notice of an original assessment for the year, and the day of sending an original notification that no tax is payable; in any other case, the period ends after three years. However, if the taxation year has not been assessed (for example, the taxpayer has not filed a return for the year), the normal reassessment period would not have begun, and CRA would be able to assess at any time.

In any event, when it comes to foreign property assets or transactions with non-residents, consult with your pros to stay onside with the required filings and stay away from the “late filing” penalty box.

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