Published October 31, 2023.

As a Canadian CPA, staying updated with legislative changes is vital. In this blog we continue our coverage of changes that took effect over this past summer as part of new mandatory reporting legislation. Part of the new reporting requirements that form part of Bill C-47 are Reportable Uncertain Tax Treatments (RUTTs). In case you missed it, these much talked about measures took effect on June 22, 2023, when the Bill received royal assent. So, let’s delve deeper into this part of the new legislation.

Unpacking RUTTs: Who and What to Report?

A RUTT arises when there’s uncertainty over whether a tax treatment, used or proposed for an entity’s Canadian tax filings, aligns with the tax law. Specific criteria dictate who should report:

Corporation Size & Nature: Corporations, whether resident or non-resident with a taxable presence in Canada, are on the radar. The entity should have at least $50 million in assets by the end of the relevant financial year.

Financial Statements: The corporation (or its consolidated group) should have audited financial statements, compliant with international standards like the IFRS or country-specific GAAPs, such as U.S. GAAP.

Uncertainty Indication: The financial statements should show the uncertainty. For instance, the entity might have concluded that it’s improbable that the CRA would accept the uncertain tax treatment.

Once identified, the RUTT must be reported using the prescribed Form RC3133 when the corporation’s Canadian income tax return is due.

The Devil is in the Details: Key Reporting Clauses

Equity Accounting: RUTTs stemming from financial statements using the equity method need reporting. But if the investment relates to another reporting entity, only the latter files the RC3133.

Partnerships: Corporations must disclose RUTTs linked to their partnership stakes, proportional to their shares.

Currency: Amounts on Form RC3133 should be in Canadian dollars. If the functional currency differs, a reasonable foreign exchange rate, as stipulated under section 261 of the Income Tax Act, is necessary.

Scope: The reporting is confined to taxes governed by the Income Tax Act, excluding others like GST or non-Canadian taxes.

Navigating RUTT Reporting Complexities

The weekly penalty for non-compliance is steep: $2,000 for every RUTT not reported, capped at $100,000 for each unreported RUTT. This structure makes it imperative for CPAs to approach RUTT reporting with utmost diligence.

Here are some steps to ensure smooth sailing:

In-depth Review: Undertake comprehensive internal checks to pinpoint all RUTTs.

Professional Consultation: Where needed, engage tax experts to identify potential RUTTs and guide timely filing.

Consistent Monitoring: Keep an eye on tax positions, especially those that might turn uncertain due to legislative shifts or reinterpretations.

Prioritize Timeliness: Given the penalty design, swift identification and reporting are paramount.

In Conclusion

The enhanced mandatory disclosure rules, especially regarding RUTTs, signify a move towards greater transparency and accountability in Canadian tax matters. Stay informed, stay prepared, and always prioritize clarity and transparency in all tax matters.

One way to stay informed is through tax courses like AJAG’s Income Tax Update, 2023, and Mandatory Disclosure Rules – What you need to know, and Technical Tax Update 2023. You can find all of AJAG’s tax courses HERE.

In Part 5, the final blog of this series, we discuss penalty provisions and due diligence defences to help mitigate risks.


The information contained in this blog post is intended for general informational purposes only and should not be construed as legal, accounting, or tax advice. While every effort has been made to ensure the accuracy and reliability of the content, the author and publisher make no representations or warranties as to the completeness, accuracy, or applicability of any information provided.

Neither the author nor the publisher shall be liable for any errors or omissions in the content, or for any actions taken in reliance thereon. Readers are advised to consult the original legislation or other legal sources for complete and accurate information.