PayPal ordered to provide CRA with information about Company accounts

PayPal has been arranged to offer the Canada Revenue Agency with information regarding its business account holders, as taxation officers search for companies that don’t report their income.

The business says a Federal Court order requires it to provide information regarding business accounts that received or received a payment between Jan. 1, 2014, and Nov. 10, 2017.

It’s not required to offer information regarding customers who have private PayPal accounts.

Within an email statement to The Globe and Mail, the company stated: “We’ve informed affected customers and they can contact us if they have any questions. We also have shared information on the Help Centre to help them comprehend our reporting obligations. …

“This is a one-time disclosure of information to the CRA for Canadian PayPal Business Account holders which received or sent a payment between 2014 and 2017. This isn’t an on-going request for information,” it said. “The CRA regularly seeks court orders as part of its mandate under the Income Tax Act and the Excise Tax Act to compel organizations to disclose information associated with an individual or company for tax reporting purposes. In the past eBay Canada in 2009 and Square Canada in 2016 received comparable Federal Court orders to disclose specific customer information to the CRA.”

PayPal has 6.4 million active customer accounts holders in Canada, such as 250,000 active retailer client accounts, including retailers of all sizes. The company said it can not disclose how many are affected, however, the huge majority of PayPal account holders in Canada are private account holders.

Within an e-mailed announcement, CRA spokesperson Patrick Samson stated “The underground market harms companies, consumers and the Canadian tax base. The CRA has adopted measures to promote tax compliance, protect the fairness and integrity of the taxation system, and maintain equal opportunities for companies and individuals. Additionally, it examines sectors where underground economy activities are common, such as payment processing, and is taking the necessary steps.

“To better detect activity in the underground economy, the CRA has improved its use of data from third parties, particularly in industries where cash operations are regular. The CRA has also considerably stepped up efforts to identify people and companies that don’t file tax returns and to repay their document”

Hussein Warsame, a professor of accounting at the University of Calgary, said the government is attempting to track down companies in the underground market. “They are basically trying to target people they think are concealing their income or evading taxation essentially. That’s what they are trying to fight: tax evasion.”

Duane Milot, a tax attorney with Milot Law in Toronto, said taxpayers who are impacted by the Federal Court order will probably be audited by the CRA and may be assessed additional tax, interest and penalties on any unreported income.

“Some taxpayers may be able to assert that their PayPal account was used for private matters — transferring funds to a relative or buying household goods — rather than in the course of a business. Taxpayers will need to produce receipts and other supporting documentation,” Milot said.

“To ascertain whether a taxpayer has a business or not, the CRA will consider the amount of trades in the accounts and the number of funds transferred. There might be GST/HST consequences if the taxpayer has taxable supplies of over $30,000 each year.

“Some taxpayers may attempt to use the CRA Voluntary Disclosure program to disclose any unreported income, but the CRA is very likely to take the position that the disclosure wasn’t voluntary. If the disclosure isn’t voluntary, then the taxpayer can’t benefit from no criminal prosecution, no penalties and reduced interest. Some taxpayers who have substantial unreported income in their PayPal business accounts, over several years, could be prosecuted criminally.”

On , PayPal said the court order requires it to disclose the following information about business account holders that received or received a payment between Jan. 1, 2014 and Nov. 10, 2017:

  • The entire name of every person or corporation holding a business account which has a Canadian address;
  • The date of birth of each person holding a company account;
  • the company name, if applicable;
  • The phone number(s) of the company or person holding the company accounts, if available;
  • the entire address(es) of the company or person holding the company accounts;
  • The email address of the corporation or person holding the company accounts;
  • The social insurance number and/or company number of the company or person holding the company accounts, if available.

It will be required to disclose the following information on trades made by the account holder:

  • The entire quantity and value of received transactions for each calendar year between Jan. 1, 2014 and Nov. 10, 2017.
  • The entire number and value of sent transactions for each calendar year between Jan. 1, 2014 and Nov. 10, 2017.

Courtesy: The Globe And Mail

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