Offshore Asset & T1135 Risk: Azmayesh-Fard v HMK & Strategic Dispute Planning

Key Takeaways from Azmayesh-Fard v HMK

• Enforcement is accelerating. CRA’s access to global financial data has fundamentally changed how offshore holdings are detected.

• Risk is dynamic. Proactive tax dispute monitoring and planning - not just voluntary disclosure - leads to better outcomes.
• Timing is critical. Taxpayers who assess exposure and adjust positioning before CRA action maintain control.

CRA’s Growing Offshore Reach 

Case Insight: Azmayesh-Fard v. The King (2025 TCC 20)

The Tax Court ruled that the taxpayer’s failure to report a Swiss bank account for nearly two decades constituted misrepresentation due to neglect or carelessness. This allowed the CRA to reassess multiple years beyond the normal limitation period and apply penalties. However, the Tax Court also vacated penalties for later years, reinforcing that while CRA has significant enforcement tools, it must still establish proper grounds for reassessments.

This case underscores how structured foreign banking arrangements are increasingly subject to detection and enforcement. It highlights how global information-sharing agreements, beneficial ownership registries, and evolving audit strategies make non-disclosure a high-risk approach. The broader trend is clear: waiting for CRA action limits available options, whereas proactive dispute planning provides control.

Strategic Positioning: Managing Risk Before It Escalates

Sophisticated taxpayers don’t wait until an audit notice arrives. Instead, they integrate dispute planning into broader financial decision-making, ensuring:

• Risk is actively assessed on specific "check-in dates" and key intervals, not just when filing returns.
• Legal positioning is optimized so that if scrutiny arises, the response is controlled and strategic.
• Adjustments are made proactively based on shifting CRA enforcement patterns.

Options Before CRA Initiates Contact

For those not yet on CRA’s radar, a structured legal strategy provides more flexibility than reactive disclosure:

1. Legal Risk Mapping: Understand your current exposure and identify preemptive actions.
2. Strategic Check-Ins: Regularly assess whether shifting enforcement trends warrant action.
3. Preemptive Filing vs. Holding Position: Weighing the optimal timing for voluntary disclosure or structured response planning.

Options After CRA Initiates Action

If CRA has already flagged an issue, the focus shifts to damage control and dispute resolution:

• Objection Strategy: Filing a Notice of Objection can challenge penalties or reassessments before they escalate.
• Tax Court Planning: Recent Tax Court cases (Douglas v. The Queen, Moore v. The Queen) show that well-handled appeals can overturn penalties.
• Positioning for Negotiation: The strength of your initial response significantly influences the outcome. 

Closing Remarks

The Tax Court's Azmayesh-Fard decision and evolving enforcement trends reinforce the importance of proactive dispute strategies in managing T1135-related risks. 

As global tax enforcement tightens, those who plan ahead are better equipped to navigate complexities and mitigate risk. Those who address potential issues early can better navigate disclosure, objections, and legal challenges. Understanding the nuances of CRA’s approach to foreign asset compliance - and making high-quality decisions - can significantly improve a taxpayer’s legal position and economic outcome.

A proactive approach to dispute resolution ensures taxpayers can anticipate challenges and make decisions aligned with their risk profile and objectives.