The federal and provincial tax systems are based on self-assessment; it is the responsibility of each taxpayer to report his or her income to the government. Because of the autonomy granted by this system, some taxpayers omit, for various reasons, to file all the required declarations.
To remedy such unfortunate omissions, the tax authorities have implemented a voluntary disclosure program to encourage taxpayers, who are in a situation of non compliance, to correct incorrect information or to provide information that had not been previously reported to tax authorities, and to pay the amounts owing. This process allows the taxpayer to adjust his or her information prior to measures being taken, thereby sometimes avoiding penalties. The program aims to achieve balance between offering the opportunity to make corrections and preserving an equitable tax system.
Conditions for acceptance
Five conditions must be met for a valid voluntary disclosure application: it must be voluntary, complete, verifiable, include information that is at least one year past due, and include payment of the estimated tax owing.
To be complete and verifiable, the taxpayer must provide all information, documents, or exhibits that may be necessary or useful to the verification of the voluntary disclosure’ allegations. Any tax debt must be paid with the application.
Furthermore, the taxpayer cannot benefit from the voluntary disclosure program when in one of the following situations:
- He or she has received notice of an upcoming tax audit;
- He or she has already applied to the voluntary disclosure program in the past;
- The disclosure is for information dating back more than ten years prior to the current calendar year;
- He or she deliberately avoided his or her tax obligations.
Conclusion
If you’ve omitted to fulfill your tax obligations, you may still have time to correct the situation. As previously mentioned, voluntary disclosure is only possible if no enforcement actions or investigations have been undertaken with respect to the information being disclosed. You need to act quickly when you realize such an omission occurred.
By filing an application, you may be able to benefit from relief in respect of the penalties and interest prescribed under fiscal legislation. However, it should be mentioned that the relief is at the discretion of tax authorities who will verify the information and documents provided. In fact, they are not obligated to grant the relief, although they need to provide the reasons for their refusal, as the case may be. The decision may be the object of a legal challenge, under certain conditions.
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With our professional resources, lawyers, notaries and tax specialists across the Quebec territory, Cain Lamarre is the most established law firm in Quebec and one of the largest.
Contact us for more information: danny.galarneau@cainlamarre.ca
