The Mandatory Disclosure Rules: Narrowing In On Reportable Transactions

Canada’s newly expanded mandatory disclosure rules (the “MDR”) are approaching their third anniversary. The enhanced MDR cover three types of reporting requirements:

• reportable transactions capture avoidance transactions that meet one of three specific hallmarks;
• notifiable transactions are specific types of transactions that are designated by the Minister of National Revenue along with any transaction that is the same as or substantially similar to a designated transaction; and
• reportable uncertain tax treatments are uncertainties reflected in a corporation’s audited financial statements.

Of the three types of reporting covered by the MDR, reportable transactions have created the most anxiety for taxpayers and their advisors owing to potentially significant penalties and difficulties in determining whether a given transaction is in scope. However, as we explain below, a more nuanced understanding of their impact and scope is developing.