Amendments to the Income Tax Act (“ITA”) expanding existing mandatory disclosure obligations, creating a new category of notifiable transactions, and deleting a provision that relieved parties from the disclosure obligation when it had been fulfilled by another party to the transaction, received Royal Assent at the end of June. The provisions, which require taxpayers and advisors, including legal counsel, to report to the Canada Revenue Agency on transactions that may constitute aggressive tax planning, came into force immediately. While information reasonably believed to be protected by solicitor client privilege is exempt from disclosure, legal professionals are required to disclose all non-privileged information.
The Federation of Law Societies of Canada is challenging the constitutionality of these amendments to the ITA. An interim injunction is being sought pending consideration of the constitutional challenge. In the meantime, a consent injunction is in place that has the effect of suspending the application of the challenged provisions to lawyers and articling students in Canada. This consent injunction will be in place until a determination can be made on the primary injunction application or November 20, 2023, whichever is earlier.
A detailed backgrounder from the Federation of Law Societies of Canada is attached here.