Misrepresentation of a tax matter by a third party

The Income Tax Act provides for third-party civil penalties to deter third parties from making false statements or omissions in relation to income tax or GST/HST matters. The following penalties are directed at ensuring tax compliance and deterring inappropriate behaviour.

Penalties for misrepresentation in tax planning arrangements

Under subsection 163.2(2), every person:

• who makes or furnishes a statement, who participates in the making of a statement, or who causes another person to make or furnish a statement, and

in respect to the statement,

• who knows it is a false statement, or who would reasonably be expected to know it is a false statement but for circumstances amounting to culpable conduct, and another person could use the false statement for a purpose of this Act,

that person is liable to a penalty in respect of the false statement.

Under subsection 163.2(3), the penalty for the false statement is:

• if the statement was made in the course of a planning activity or a valuation activity, a minimum of $1,000, to a maximum of the person's total gross entitlements at the time at which the notice of assessment of the penalty is sent to the person, and
• in any other case, $1,000.

Penalties for participating in a misrepresentation

Under subsection 163.2(4), every person:

• who makes a statement, who participates in the making of a statement, who assents to the making of a statement, or who acquiesces in the making of a statement, and

the statement is made to another person, or by another person, or on behalf of another person, and in respect to the statement,

• the person knows it is a false statement, or would reasonably be expected to know it is a false statement but for circumstances amounting to culpable conduct, and another person could use the false statement for a purpose of this Act,

that person is liable to a penalty in respect of the false statement.

Under subsection 163.2(5), the penalty for the false statement is:

• a minimum of $1,000,

to a maximum of whichever of the following amount is less:

• the penalty under subsection 163(2) that the other person would be liable for if the other person made the statement in a return filed for the purposes of the Act and the other person knew that the statement was false, or
• the total of $100,000 plus the person's gross compensation at the time at which the notice of assessment of the penalty is sent to the person if the statement could be used by or on behalf of the other person.

Date modified:

2016-03-04