Tax law isn't static. Each year, federal budgets introduce proposals, and the Canada Revenue Agency (CRA) updates its procedures. For tax professionals, staying current is not just good practice—it's essential for providing accurate advice and ensuring compliance. Let's look at some of the most significant changes affecting the 2024 and 2025 tax years.

The 2024 Federal Budget proposed several measures to expand the CRA's authority, primarily focused on information gathering. One of the key tools introduced is the 'Notice of Non-Compliance.'

If a taxpayer fails to comply with a CRA request for information, the agency can issue this notice. Once issued, a daily penalty of $50 accrues for each day the notice is outstanding, up to a maximum of $25,000. More significantly, if the taxpayer continues to fail to comply and is eventually convicted, the penalty can be up to 10% of the aggregate tax payable for the years in question. This gives the CRA substantial leverage to enforce its information requests.

The CRA is also modernizing how it communicates with businesses. Starting in spring 2025, the CRA will transition to a digital-first communication model for businesses that use the 'My Business Account' portal. This means that most correspondence, including notices of assessment and statements of account, will be delivered electronically by default. Paper notices will cease for businesses that have a My Business Account and an email address on file with the CRA.

One of the most talked-about changes has been the new reporting requirement for bare trusts. Initially, these trusts were required to file a T3 Trust Income Tax and Information Return for the 2023 tax year. However, recognizing the administrative burden this placed on many Canadians, the CRA announced a last-minute exemption for the 2023 tax year, waiving the filing requirement and any potential late-filing penalties.

While this provided immediate relief, it's important to view this as a temporary measure. The underlying legislation has not changed, and these reporting requirements are expected to be enforced in future years. The CRA has signaled that trusts remain a high-scrutiny area.

On the contributions side, the second enhancement to the Canada Pension Plan (CPP2) continues its phased implementation. For 2025, a new, second earnings ceiling has been introduced. This is known as the Year's Additional Maximum Pensionable Earnings (YAMPE).

This means there are now two tiers of contributions. The first tier applies to earnings up to the original ceiling (YMPE), and the second, new tier applies to earnings between the YMPE and the YAMPE.

Finally, Canada is moving forward with its implementation of the OECD's Pillar Two global minimum tax framework through the Global Minimum Tax Act (GMTA). This new regime is designed to ensure that large multinational enterprises (MNEs) with annual revenues over €750 million pay a minimum effective tax rate of 15% on their profits in every jurisdiction where they operate. The GMTA will apply to fiscal years of MNEs beginning on or after December 31, 2023. This legislation is complex and represents a significant shift in international corporate taxation, requiring careful planning for affected Canadian companies.

These updates highlight the evolving nature of tax compliance in Canada. Staying informed on legislative changes is key to navigating the landscape successfully.