If you are a high-net-worth individual, you may receive a call from the Canada Revenue Agency as part of a new program to scrutinize Canada’s wealthiest citizens. Ever since a KPMG tax bulletin first alerted its clients to the CRA’s latest audit initiative, the private banking and tax community has been all abuzz.

Known simply as the “Related Party Initiative,” this innocuous sounding program represents a deep dive into the financial and business affairs of those individuals having multiple related entities with a net asset value of $50-million or more, including offshore assets. These people are in the crosshairs of CRA auditors tasked with identifying and responding to “high-risk compliance issues involving high-net-worth individuals and their related economic entities,” according to the CRA.

Media reports highlighting trillions of dollars collectively held in foreign tax havens by these high-net-worth individuals have drawn the attention of regulators and cash-strapped governments the world over. The CRA’s initiative has its roots in a 2008 Organization for Economic Co-operation and Development (OECD) report that examined the global environment and financial consequences of these tax avoidance practices.

Anyone targeted for an audit will be asked to complete a T997 “audit query sheet” requiring disclosure on all related entities, including partnerships, trusts, corporations, joint ventures and private foundations, as well as providing complete financial statements for all years under review. Detailed organizational charts showing the relationships among all entities must also be produced. There is more – you’re not done yet.

The query sheet requires individuals to provide a copy of their company’s corporate minute book, along with a list of all legal and accounting firms used by the corporation, including all related correspondence, tax planning documents and memoranda.

Given the comprehensive and far-reaching nature of such a disclosure, anyone who has received a query sheet T997 questionnaire should immediately contact their tax advisors and legal counsel. The complexity of the query sheet questionnaire is such that an individual taxpayer can benefit from professional advice to help him or her answer the questions as efficiently as possible.

If you haven’t yet been contacted by the CRA but you think you may have made tax errors that need correcting, the CRA’s voluntary disclosures program that allows taxpayers to come forward, correct their tax information and pay only taxes owing plus interest (but not penalties), is worth considering. To use this program, you have to contact the CRA first before they come calling.