CRA Fixed Dollar Penalties Are Rising. . .Soon

The November 5, 2026 Federal Budget proposed to do something may Canadians have lobbied for years: indexation of tax provisions to inflation. While the government is proposing to raise some fixed dollar thresholds in favor of taxpayers, the big win will be on indexing flat rate penalties. Citing that some of these haven’t been indexed since 1927, the Finance Minister felt it was about time. Here’s what you need to know.

Some good news. The Budget proposed to increase the $100,000 foreign property threshold for filing a Foreign Income Verification Statement (T1135) to $200,000, and the threshold for simplified reporting from less than $250,000 to less than $500,000. These measures will apply to taxation years that end after 2026.

In addition, the instalment thresholds, which have not changed since 2008, will be raised from $3000 to $7,500 and then indexed to inflation starting with the 2028 tax year. Self-employed business owners will be allowed to make a single payment of two thirds of their net tax owing by December 31.

The Proposed New Penalty Provisions. Budget 2026 updates fixed-dollar administrative penalties across the Income Tax Act, Excise Tax Act, and other federal tax statutes to adjust for inflation since their enactment, generally doubling or tripling older fixed penalty amounts and establishing a mandatory 5-year automatic inflation indexation mechanism. These new rules will take effect for taxation years/fiscal periods ending after 2027 in the case of the Income Tax Act  and 2028 in the case of CRS/GST/Excise Tax Acts. 

Penalty structures have also been calibrated by corporate size, introducing significantly higher penalty tiers for medium corporations/partnerships ($2M–$10M gross revenue) and large corporations/partnerships ($10M+ gross revenue), as well as doubled penalties for repeated filing non-compliance.

The provisions to be affected are found in the following sections of the ITA: ITA: 66(12.75), 162(7), 162(7.01), 162(7.1), 162(7.4), 162(8), 162(10)(a), 162(10.1)(a), 162(11), 162, 163(2), 188.1(6), 220(3.5)(a) and (b), 237.1(7.4)(a), 281(3), 293(3), 303(3). 

The Current Penalty Provisions. Let’s take a look at some of these provisions now, as per the CRA website:

Omission of Identification Numbers. Failing to provide required identification numbers on returns or information requests attracts the following fixed dollar penalties per omission:

• Failing to provide a Social Insurance Number (SIN), Business Number (BN), or Trust Number: $100 penalty per failure.

•Omitting a foreign Tax Identification Number (TIN) under international information exchanges (like FATCA/CRS under Part XVIII or XIX): $100 or $500 penalty per failure.

Failure to file. These penalties ramp up quickly, especially for those holding offshore assets:

• 162(7) – Failure to comply to file a return: $25 per day for up to 100 days (minimum $100 and maximum $2,500).

• 162(10)(a) – Failure to furnish foreign-based information, knowingly or under circumstances amounting to gross negligence: $500 per month for up to 24 months (maximum $12,000), less any penalties already levied. (See Form T1142 rules below)

• 162(10)(b) – Failure to furnish foreign-based information – Where a demand to file a return is issued under subsection 233(1) of the Income Tax Act and the person or partnership knowingly or under circumstances amounting to gross negligence fails to comply with the demand: $1,000 per month for up to 24 months (maximum $24,000), less any penalties already levied. (See Form T1142 rules below).

• 162(10.1) – Additional penalty – After 24 months, the penalty becomes 5% of whichever of the following resulted in the requirement to file the information return, less any penalties already levied: the cost of the foreign property; the fair market value of the property transferred or loaned to the trust; or the cost of the shares and indebtedness of the foreign affiliate. See below re  Form T1142.

Form T1142 Information Return in Respect of Distributions from and Indebtedness to a Non-Resident Trust: The penalty is the greater of either $2,500 or 5% of whichever of the following the false statement or omission was made about: the fair market value of the distributed property; or unpaid indebtedness.

In the case of the other information returns, the penalty is the greater of either $24,000 or 5% of whichever of the following the false statement or omission was made about: the cost of the foreign property; the fair market value of the property transferred or loaned to the trust; or the cost of the shares and indebtedness of the foreign affiliate.

 Due diligence exception. Note that there is an exception under ITA 233.5 for  taxpayers who make diligent efforts to obtain the requested information and who:

• • disclose in the return the unavailability of the information
  • file the information within 90 days of it subsequently becoming available

Late Filing of Information Returns (Slips and Summaries). If a business or individual fails to file information returns—such as T4, T4A, T5, or T5018 slips—by the due date, the penalty is a fixed dollar amount calculated per day. The base penalty is $10, $15, or up to $100 per day depending on the type and volume of the returns, for up to 100 days. This provides for a flat maximum penalty cap of anywhere from $100 to $7,500 per information return type.

Late Filing Flow through Share Renunciations. Subsection 66(12.75) sets out the penalties for late-filed documents and late renunciations agreements with a statutory maximum of $15,000.

Bottom line: there is a window of opportunity available for taxpayers to voluntarily get their affairs in order with the CRA before penalties and interest costs rise. It’s an important part of your proactivity.

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