This is article is part of a series dealing with draft legislation released for comment by the Department of Finance on July 29th. Read the complete series:

Canada is now implementing a new international standard for the automatic exchange of financial account information between tax administrations referred to as the common reporting standard (“CRS”). Implementation of the CRS in Canada will result in Canadian financial institutions reporting to the CRA regarding financial accounts they maintain for non-residents and certain other reportable persons. It is proposed that the new CRS requirements take effect starting on July 1, 2017.

Previously, the draft CRS legislation released by the Department of Finance in April 2016 included requirements for the collection of information identifying reportable persons, including name, address, residency, taxpayer identification number (“TIN”) and date of birth. The 2016 Legislative Proposals now supplement the earlier draft legislation by introducing a $500 penalty for the failure by a reportable person to provide their TIN when required.

There are some exceptions to the new penalty. It does not apply when the reportable person makes an application for a TIN within 90 days of the TIN being requested, as long as the TIN is provided to the requestor within 15 days of receipt. As well, the new penalty does not apply if the reportable person is not eligible to obtain a TIN in the relevant jurisdiction.

The proposed CRS penalty appears to be a strict liability penalty, since intent is not part of the test in determining whether the penalty applies. Defenses to the penalty would therefore generally be limited to factual mistake (i.e. the assessed taxpayer was not in fact non-compliant) or due diligence.

The 2016 Legislative Proposals state that a CRS penalty may be assessed “at any time”. As a result, it would appear that the normal reassessment period set out in ss. 152(3.1) would not be applicable to the new penalty. The exclusion of certain administration and enforcement provisions from proposed ss. 281(4) means that reportable persons may not claim a refund of a disputed penalty upon filing a notice of objection. Further, amendments to s. 225.1 are proposed to add CRS penalties to the list of debts which are not subject to restrictions on collection.

Absent from the proposed CRS penalty regime is an express penalty for non-compliance by financial institutions and other persons required to obtain TINs and file information returns under the CRS rules. Presumably, the existing ITA penalty regime, including ss. 162(7), would be sufficient to address failures to file CRS information returns or to otherwise comply with duties or obligations imposed under the ITA. Although at $2,500 the maximum penalty under ss. 162(7) is low compared to other ITA penalties, ss. 162(7) penalties may become significant if applied cumulatively to multiple failures.

Certain due diligence requirements are now set out in the ITA for financial institutions to identify reportable accounts under the FATCA rules (by which Canada implemented the intergovernmental agreement with the United States). The 2016 Legislative Proposals will amend the FATCA due diligence requirements to be consistent with the due diligence procedures proposed for the common reporting standard. Generally, however, the new CRS rules will not change the reporting requirements to the US under the FATCA regime.