Canada Revenue Agency Reporting Requirements On Employment Settlements

Overview

On June 22, 2023, changes to the reportable transaction regime of the Income Tax Act came into force. Since that time, there has been ongoing debate about how these rules might apply to employment settlement agreements.

On November 2, 2023, the Canada Revenue Agency ("CRA") revised its guidance to clarify the reporting rules generally and provide some reassurance that normal employment severance agreements probably do not fall within these rules. While the legislative changes may not have been enacted with the intention of capturing settlement agreements in the labour and employment context, it is still important to be aware of the reporting rules as there still may be unintended reporting requirements that warrant a closer look at future settlement agreements.