Draft Legislation Released: Electronic Funds Transfers

Detailed draft legislative proposals and explanatory notes were released January 9 by Finance Canada to provide guidance on the proposed new rules. Public comment was invited, but must be submitted by February 10. Some highlights of the proposals follow...

Specifically, new Part XV.1 will be added to the Income Tax Act. It will require certain financial entities to report certain electronic transfers of funds of $10,000 (calculated in Canadian dollars at the time of transfer) or more into or out of Canada.

A 24-hour period will be used to determine whether a transaction or series of transactions requires reporting. Multiple funds transfers will be considered a single transaction for the purposes this new Part of the Act when:

• two or more international electronic funds transfers of less than $10,000 together total $10,000 or more in that time frame, and
• if they are transferred by the same entity for the same client.

Tax forms for these purposes must be filed within five (5) working days of the electronic transfer and adequate records must be kept.

Non-compliance with these new reporting requirements will result in penalties of general application found in in Part I of the Act. Failure to comply with a duty or obligation imposed under the Act or the Income Tax Regulations, will apply in respect of the requirements under Part XV.1.

To read the draft legislation, click here.