Mandatory disclosure


Taxpayers may want to review proposed changes to the interest expensing rules and other significant new draft tax legislation that was recently issued by the Department of Finance (Finance). This extensive package of legislation, which was released on 4 February 2022, features a wide range of corporate, personal and trust tax changes.

This article looks at the proposed changes to mandatory disclosure rules for income tax. For further details of other changes, please see "Draft tax legislation: limitations on deductible interest expense and other measures". Subsequent articles in this series will provide an overview of:

  • trust reporting;
  • immediate expensing; and
  • cryptoasset mining.

Finance has released these draft measures for public consultation and will accept feedback by the deadlines specified for each measure.

Mandatory disclosure

The proposed changes to mandatory disclosure rules for income tax, which amend the existing reportable transaction rules and introduce reporting requirements for "notifiable" transactions and uncertain tax treatments, were originally announced in the 2021 federal budget. The draft legislation includes details of the new reporting obligations, as well as related penalties and extended reassessment periods in cases of failure to report. The Canada Revenue Agency (CRA) has also released specific examples of "notifiable" transactions that would be required to be reported under the new rules. Finance will accept comments on the mandatory disclosure draft legislation until 5 April 2022.

Generally, these draft proposals require taxpayers to disclose:

  • reportable transactions that involve one (previously two) of the following (where it can reasonably be concluded that one of the main purposes of entering into the transaction is to obtain a tax benefit):
    • a contingent fee arrangement;
    • a confidential protection; or
    • a contractual protection;
  • a "notifiable" transaction, including transactions that the CRA has found to be abusive and other transactions that the CRA has identified as transactions of interest; and
  • uncertain tax treatments reflected in the audited financial statements of a corporation (or a consolidated group of which the corporation is a member) where the carrying value of the corporation's assets is at least $50 million.

Generally, taxpayers would be required to disclose reportable transactions and notifiable transactions (or transactions that are substantially similar to a notifiable transaction) to the CRA within 45 days of the earlier of the day that:

  • the taxpayer (or the other person who entered into the transaction for the taxpayer's benefit) becomes contractually obliged to enter into the transaction; or
  • the transaction is entered into by the taxpayer (or the other person).

Similar reporting rules apply for promoters or advisors (and certain non-arm's length persons who are entitled to receive a fee with respect to the transaction) in respect of such arrangements, with an exception where solicitor-client privilege may apply. Taxpayers would be required to disclose uncertain tax treatments at the same time that the reporting corporation's income tax return is due. The reportable transaction and notifiable transaction proposals apply to transactions after 2021 and the uncertain tax treatment reporting proposals apply to taxation years that begin after 2021.


Alongside this draft legislation, the CRA has also released different "notifiable" transactions that would have to be reported, including:

  • transactions to manipulate Canadian-controlled private corporation status in order to avoid anti-deferral rules applicable to investment income;
  • straddle-loss creation transactions using a partnership;
  • transactions to avoid deemed dispositions of trust property;
  • transactions to manipulate bankrupt status to reduce a forgiven amount in respect of a commercial obligation;
  • transactions that rely on the purpose tests in section 256.1 to avoid a deemed acquisition of control; and
  • back-to-back arrangements (thin capitalisation and Part XIII tax).

For further information on this topic please contact Byron Scott Beswick or Vincent Dionne at KPMG Law by telephone (+1 416 777 8000) or email ([email protected] or [email protected]). The KPMG Law website can be accessed at