Have Foreign Bank Accounts? CRA Can Reassess You for Years – And It Could Cost You Big

If you have a foreign bank account or other offshore assets, you might think it’s no big deal. Maybe you inherited some money overseas, maybe you worked in another country and left funds there, or maybe, like the taxpayer in a recent Tax Court case, you wanted to keep money hidden from your family.

But here’s the thing – if you don’t report those assets properly, CRA can go back multiple years, reassess you, and hit you with huge penalties. That’s exactly what happened in Azmayesh-Fard v. The King, 2025 TCC 20.

The Cost of Not Reporting Foreign Accounts

In this case, the taxpayer, Mr. Azmayesh-Fard, worked as an engineer in Libya and moved back to Canada in 1997. Before returning, he opened a Swiss bank account with $431,000 CAD, specifically to hide it from his wife. From 1998 to 2013, he never reported the account, its earnings, or filed the required T1135 Foreign Income Verification Statement.

Fast forward to a CRA audit – and the damage was brutal:

• CRA reassessed him for 16 years (1998-2013), adding all unreported income from the Swiss account.
• Gross negligence penalties under s.163(2) of the Income Tax Act (ITA) were applied for multiple years.
• Failure-to-file penalties under s.162(7), (10), and (10.1) ITA were also added for missing T1135 forms.

The Total Cost? Easily Hundreds of Thousands of Dollars

Although the exact amount Kamal Azmayesh-Fard had to pay in taxes and penalties isn’t specified, we can estimate the total cost based on the court’s findings and some reasonable assumptions.

• The CRA reassessed 16 years (1998–2013), increasing his taxable income by an average of 63% per year. If we assume his originally reported income was around $100,000 per year, that means an additional $1,008,000 in unreported income ($100,000 × 63% × 16 years = $1,008,000), resulting in approximately $403,200 in unpaid taxes ($1,008,000 × 40% tax rate = $403,200).
• On top of that, gross negligence penalties (50% of unpaid taxes) likely added $201,600 ($403,200 × 50% = $201,600).
• Failure-to-file T1135 penalties—which could include a $2,500 per year base penalty plus 5% of his highest unreported asset value ($431,000)—may have added $40,000 or more ($2,500 × 16 years + ($431,000 × 5%) = approx. $40,000).
• Interest, compounded daily over two decades, could have easily doubled or tripled the total amount owed, adding at least $400,000 (estimated based on CRA interest rates over 20+ years)

In total, his liability likely exceeded $1,000,000—far more than the $431,000 he originally deposited offshore.

Why Could CRA Reassess So Many Years?

Normally, CRA has three years (for most individuals) or four years (for certain situations) to reassess a tax return. But there’s a major exception:

• Under s.152(4)(a)(i) ITA, CRA can go back as far as they want if they determine there was “misrepresentation attributable to neglect, carelessness or wilful default.”
• In this case, the court ruled that failing to report a foreign bank account for 16 years was at least neglect, if not willful blindness.
• That meant CRA could reassess every single year all the way back to 1998.

Key Takeaways: Protect Yourself Before CRA Comes Calling

1. Own or hold more than $100,000 CAD in foreign assets? You must file a T1135.
   • It’s not optional. Failing to file can trigger daily penalties, and if CRA determines it was done knowingly, the penalties skyrocket.
2. Even if you “forget,” CRA can still go back decades.
   • As this case shows, neglect or carelessness is enough for CRA to reassess beyond the normal three-year limit.
3. Gross negligence penalties are severe.
   • These penalties can be 50% of the unpaid tax, and CRA often applies them when foreign income is hidden.
4. Just because your accountant didn’t ask doesn’t mean you’re off the hook.
   • The taxpayer in this case argued that his accountant never asked about foreign assets. The court didn’t care – it’s the taxpayer’s responsibility to report.
5. Thinking of coming clean? The Voluntary Disclosures Program (VDP) might help.
   • If you haven’t been reporting foreign income or assets, coming forward before CRA audits you could reduce penalties. But once CRA starts investigating, VDP is off the table.

Bottom Line: Don’t Play Games with Foreign Assets

As the court case demonstrates, the CRA is cracking down on unreported foreign accounts. If you have money overseas, make sure you’re reporting it properly – or you could end up like this taxpayer, facing years of reassessments, massive penalties, and a financial nightmare.