On 20 April 2023, the Canadian federal government tabled Bill C‑47, which includes the legislation to implement revised and expanded disclosure rules relating to tax avoidance transactions and uncertain tax treatments, commonly referred to as the mandatory disclosure rules (MDR). These measures were initially announced in the 2021 federal budget, with draft legislative proposals released on 4 February 2022 and 9 August 2022.
MDR is comprised of three distinct regimes:
- reportable transactions, triggered by generic hallmarks, to apply to transactions entered into on or after the date Bill C‑47 receives royal assent (the date of royal assent)
- notifiable transactions, triggered by resemblance to specifically designated transactions, to apply to transactions entered into on or after the date of royal assent
- uncertain tax treatments, triggered by financial statement recognition, to apply to tax years beginning after 2022 (specific penalties for late‑filing to apply only to tax years beginning on or after the date of royal assent)
The reportable and notifiable transaction regimes require information reporting by taxpayers and any relevant advisers or promoters. The deadlines are generally 90 days from the implementation date of the relevant transactions. Where a transaction is part of a series of transactions, it is possible to file one form that discloses all such transactions.
The uncertain tax treatments regime applies only to large corporate taxpayers (generally those with assets of at least $50 million) and the reporting deadline is the same as for the corporate tax return (i.e. six months after year end).
As the coming into force of all three MDR regimes is tied to the date Bill C‑47 receives royal assent, which is expected to occur in late June 2023, taxpayers, advisers and promoters should start preparing for and complying with these rules.