{"id":12885,"date":"2026-04-21T09:56:11","date_gmt":"2026-04-21T09:56:11","guid":{"rendered":"https:\/\/www.europesays.com\/canada\/12885\/"},"modified":"2026-04-21T09:56:11","modified_gmt":"2026-04-21T09:56:11","slug":"wealthy-canadians-should-prepare-for-audits-focused-on-these-areas","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/canada\/12885\/","title":{"rendered":"Wealthy Canadians should prepare for audits focused on these areas"},"content":{"rendered":"

Open this photo in gallery:<\/a><\/p>\n

Specific priorities for audits are continually evolving and are outlined in the Canada Revenue Agency\u2019s departmental plans each fiscal year.Sean Kilpatrick\/The Canadian Press<\/p>\n

The deadline for filing taxes in Canada for 2026 is April 30. As the big day approaches, Globe Advisor and Globe Investor have teamed up to offer advice on how to maximize returns, find credits and avoid an audit. The full series can be found here<\/a>.<\/p>\n

For high-net-worth Canadians, certain assets, deductions and transactions come with added complexity and reporting requirements \u2013 and may be more likely to attract the Canada Revenue Agency\u2019s attention.<\/p>\n

Specific priorities for audits are evolving continually and are outlined in the agency\u2019s departmental plans each fiscal year. <\/p>\n

In recent years, the agency has focused on unwarranted GST\/HST claims, cryptocurrencies<\/a> and real estate transactions, as well as tax avoidance within the wealthy population and issues relating to non-resident taxpayers.<\/p>\n

The CRA said in its departmental plan for 2026-27<\/a> that it\u2019s making significant investments in advanced data analytics and AI to optimize compliance processes and identify gaps. <\/p>\n

Greg London, partner and domestic tax consulting leader with BDO Canada LLP in St. John\u2019s, says these upgrades have enhanced the CRA\u2019s ability to look at the full scope of an individual\u2019s tax situation rather than just analyzing a single transaction.<\/p>\n

\u201cYou may start with a personal tax audit, and all of a sudden your corporation is being pulled in, and they\u2019re looking at your corporation and your trust,\u201d he says.<\/p>\n

With the amount of data now available, he adds, \u201cany planning you\u2019re doing of any significance \u2013 you almost have to assume it\u2019s going to get looked at.\u201d<\/p>\n

The CRA also may be conducting more audits \u2013 roughly 84,000 compliance actions in 2024-25, compared with almost 69,000 the year before.<\/p>\n

Here are a few areas experts say often come up and may lead to scrutiny for high-net-worth clients:<\/p>\n

Foreign asset reporting<\/p>\n

The requirement for individuals to report assets held offshore is an area that often comes up, says David McCormick, a tax litigator with Legacy Tax + Trust Lawyers in Vancouver. <\/p>\n

Taxpayers who hold \u201cspecified foreign property,\u201d whether cash or other assets (such as an interest in a non-resident trust or corporation), for which the fair market value exceeds $100,000 at any point in the year, must report it to the CRA via form T1135. <\/p>\n

\u201cUsually, there\u2019s no tax consequences for reporting all that information; it doesn\u2019t increase your taxes owing, it\u2019s simply a compliance thing,\u201d Mr. McCormick says.<\/p>\n

However, the penalties for non-compliance can be onerous. <\/p>\n

\u201cMost of them, in the worst potential scenario, are calculated as a percentage of the value of the assets held offshore,\u201d he says.<\/p>\n

Source of funds<\/p>\n

In the case of non-resident high-net-worth individuals, Mr. McCormick says he\u2019s seen a steady volume of offshore compliance audits over the past few years, asking about the source of funds received from another jurisdiction.<\/p>\n

The most common relates to high-net-worth individuals \u201cwho have limited reported income in Canada and who may be receiving large transfers of funds from overseas,\u201d he says. <\/p>\n

Most often, the people receiving these transfers don\u2019t have \u201csubstantive reporting requirements\u201d in Canada, he adds. <\/p>\n

At the same time, it\u2019s important for clients to have a well-documented explanation for the source of funds or the chain of intermediaries used, he says.<\/p>\n

Foreign tax credits<\/p>\n

With the sale of U.S. property ramping up and some Canadian residents realizing employment income in other jurisdictions, foreign tax credit claims are an area of focus for the CRA, says Dante Rossi, director, tax planning with BMO Private Wealth in Toronto.<\/p>\n

\u201cBusiness income, foreign employment income, sales of foreign real estate properties \u2013 those are taxes paid in foreign jurisdictions that you\u2019re claiming credit in Canada to which the CRA doesn\u2019t really have intel on,\u201d he says.<\/p>\n

The CRA will examine a client\u2019s documentation to support their credit claims in Canada, he says, \u201cbecause you\u2019re effectively reducing your Canadian tax liability, and that\u2019s the design of the system. But they want to make sure [of] the integrity of it.\u201d<\/p>\n

Business expenses<\/p>\n

Whether home office expense claims, vehicle expenses or repeated losses, business expense claims are a perennial audit red flag \u2013 especially year-over-year deduction spikes, Mr. Rossi says.<\/p>\n

\u201cHome office expenses are always a scrutinized area because it\u2019s quite complicated,\u201d he says. \u201cDifferent tests are required to be met to claim expenses, and then different types of expenses can be claimed, whereas others are denied, depending on the framework you fit into.\u201d<\/p>\n

The CRA is checking for the reasonability and consistency of those expenses, Mr. Rossi says.<\/p>\n

For some high-net-worth individuals, luxury assets used for both business and personal purposes will likely be flagged to determine whether they\u2019re deductible \u2013 and, if so, whether they should be classified as a capital or expense item, Mr. London says.<\/p>\n

\u201cThere\u2019s a reinvigorated look at anybody who owns any type of aircraft through companies,\u201d he says, as well as any \u201clarge-scale properties that might be multi-use.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"Open this photo in gallery: Specific priorities for audits are continually evolving and are outlined in the Canada…\n","protected":false},"author":2,"featured_media":5959,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[7040,136,17,3556,484],"class_list":{"0":"post-12885","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-canada","8":"tag-advisor-noregwall","9":"tag-appwebview","10":"tag-canada","11":"tag-globe-advisor","12":"tag-noastack"},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/posts\/12885","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/comments?post=12885"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/posts\/12885\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/media\/5959"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/media?parent=12885"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/categories?post=12885"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/tags?post=12885"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}