On 16 April 2024, Chrystia Freeland, deputy prime minister and federal finance minister, unveiled the Canadian Federal Budget for 2024-2025. This budget introduces pivotal tax measures, particularly focusing on the implementation of the Crypto-Asset Reporting Framework (CARF) and modifications to the Common Reporting Standard (CRS), which are set to be enforced from 2026.
Taina, which offers a fully automated FATCA and CRS validation platform, has offered an insight into what the new Canadian Federal Budget means for tax compliance.
The budget further proposes several additions to the information gathering capabilities under the Income Tax Act (ITA), significantly boosting the Canada Revenue Agency (CRA)’s audit capabilities. This enhancement is expected to affect future offsite and onsite FATCA and CRS audits, potentially impacting a wide range of financial institutions.
A significant focus of this budget is the formal adoption and enforcement of the Organisation for Economic Co-operation and Development (OECD)’s CARF under Canadian law. Starting in 2026, this policy mandates new due diligence and annual reporting requirements for Crypto-Asset Service Providers (CASP) in Canada. These providers, which include crypto exchanges and brokers, will need to compile and submit detailed information on their clients, covering aspects from personal identification to transaction values.
In terms of funding, the budget allocates CA$51.6m over five years to support the CRA in administering these new measures, with an additional annual budget of CA$7.3m earmarked for ongoing operational costs. This financial commitment underscores the government’s dedication to tightening compliance in the evolving landscape of digital finance.
Parallel to CARF, the budget also proposes amendments to the existing CRS rules within the ITA. These amendments aim to broaden the types of financial assets covered, enhance the coordination between CRS and CARF, and strengthen the overall due diligence processes. This revision will also be applicable from 2026, facilitating a smoother integration and reporting process in the subsequent years.
Recent audits under FATCA and CRS have highlighted several compliance issues among Canadian Financial Institutions, ranging from missing taxpayer identification numbers to inconsistencies in filed reports. These findings emphasize the need for enhanced oversight and the importance of the proposed legislative amendments.
In light of the upcoming changes and the nearing reporting deadlines, Canadian Financial Institutions, particularly those dealing in digital assets, face significant challenges. TAINA’s fully automated FATCA and CRS Validation Platform offers a robust solution, helping institutions navigate the complexities of compliance. By automating the collection, validation, and maintenance of relevant tax documents, TAINA not only simplifies the compliance process but also enhances operational efficiency, reduces costs, and mitigates risks, ultimately improving customer and investor relations.
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