There are a variety of measures in which the CRA assesses taxpayers when it believes a taxpayer is evading tax. Some examples of these measures include the following:
- Transfer pricing assessments: These occur when CRA believes that a multinational corporation is manipulating pricing arrangements between their non-arm’s length entities to move profits out of Canada to low-tax jurisdictions.
- Offshore investment assessments (section 94.1): If CRA believes that a taxpayer’s main motive for investing money overseas is to derive a significant tax benefit, they will tax you on the income from those offshore investments.
- General Anti-Avoidance Rule (“GAAR”) assessments: The CRA invokes the GAAR to assess a taxpayer whom it believes has executed an abusive tax avoidance transaction.
The CRA can be overaggressive in reassessing tax plans and therefore a thorough defence can result in a positive outcome for the taxpayer.