Running a business in Canada means balancing growth with compliance—and few things can disrupt operations more than a Canada Revenue Agency (CRA) audit. Each year, the CRA identifies key areas of focus for its audit and compliance activities. For 2025, these priorities reflect the CRA’s ongoing efforts to address tax evasion, improve fairness in the tax system, and ensure both small businesses and large corporations are meeting their obligations.

In this article, we’ll cover the CRA’s top audit priorities for 2025, what they mean for your business, and practical steps to reduce your risk of an audit.

Why the CRA Shifts Its Audit Priorities Each Year

The CRA doesn’t audit at random. Instead, it takes a risk-based approach, directing resources where non-compliance is most likely. Factors include:

  • Changes in the economy and new industries (such as digital services).
  • Gaps the CRA has identified in past audits.
  • The introduction of new tax rules.
  • Information sharing with international partners.

For businesses, this means it’s essential to stay informed. By knowing where the CRA is focusing its attention, you can proactively strengthen compliance and avoid unnecessary headaches.

1. Aggressive Tax Planning and Use of Complex Structures

The CRA continues to scrutinize businesses that use sophisticated tax structures to minimize tax liability. This includes:

  • Excessive use of holding companies and trusts.
  • Transfer pricing strategies that shift profits out of Canada.
  • Aggressive income splitting within families.

While many of these strategies are legal if implemented correctly, the CRA will look closely at intent. If the primary purpose is avoiding tax rather than genuine business needs, it could trigger an audit.

What businesses should do:

  • Document the commercial rationale behind corporate structures.
  • Ensure related-party transactions are at fair market value.
  • Work with a tax professional to assess whether tax planning strategies meet compliance standards.

2. GST/HST Non-Compliance

For 2025, the CRA has flagged GST/HST compliance as a high-priority area. This applies across industries but is particularly relevant for:

  • E-commerce and online sales.
  • Businesses offering digital products or cross-border services.
  • Contractors and small businesses that fail to remit GST/HST.

The CRA is also monitoring improper input tax credit (ITC) claims, where businesses try to recover GST/HST on ineligible expenses.

What businesses should do:

  • Ensure GST/HST is charged correctly on all taxable supplies.
  • Maintain proper documentation for ITC claims.
  • File GST/HST returns on time to avoid penalties.

3. Digital Economy and E-Commerce Transactions

The digital economy is growing rapidly, and with it comes increased CRA oversight. In 2025, audits will pay special attention to:

  • Online retailers underreporting income.
  • Gig economy workers (Uber drivers, delivery apps, freelancers) not reporting all earnings.
  • Foreign companies selling digital services to Canadians without proper GST/HST registration.

What businesses should do:

  • Accurately track online sales through platforms like Shopify, Amazon, or Etsy.
  • Issue and keep proper invoices for all digital transactions.
  • If operating internationally, confirm GST/HST registration requirements.

4. Cross-Border Transactions and Transfer Pricing

Businesses with international operations can expect continued scrutiny on cross-border activity. The CRA will be checking:

  • Whether transfer pricing policies align with OECD guidelines.
  • Payments to related non-resident entities for services, royalties, or management fees.
  • Compliance with reporting requirements such as Country-by-Country (CbC) reporting.

Given the global push against tax base erosion, multinational businesses will be under the microscope in 2025.

What businesses should do:

  • Keep detailed transfer pricing documentation.
  • Ensure intercompany charges reflect market value.
  • Review contracts with related entities for compliance.

5. Underground Economy and Cash Transactions

The CRA is committed to reducing the underground economy—unreported income from cash-based businesses. Industries under increased review include:

  • Construction and home renovation.
  • Hospitality (restaurants, bars, catering).
  • Personal services (salons, spas, gyms).

CRA data analytics now make it easier to detect discrepancies between reported income and industry benchmarks.

What businesses should do:

  • Report all income, including cash.
  • Use accounting software that ensures accurate recordkeeping.
  • Be prepared to explain significant variances compared to industry averages.

6. Employer Payroll Compliance

Payroll audits will remain a significant area of focus in 2025, especially with remote and hybrid work arrangements. The CRA is reviewing:

  • Proper classification of workers as employees vs. independent contractors.
  • Accurate deductions for CPP, EI, and income tax.
  • Employer compliance with taxable benefits (e.g., vehicle allowances, housing, remote work stipends).

What businesses should do:

  • Clearly document employment relationships.
  • Review taxable benefits policies to ensure compliance.
  • File T4 and T4A slips correctly and on time.

7. Real Estate Transactions

The CRA has long been vigilant about real estate transactions, and in 2025 this continues. Areas under focus include:

  • Flipping properties without reporting as business income.
  • Improper claims of the Principal Residence Exemption.
  • Non-residents buying and selling Canadian property without proper reporting.

What businesses should do:

  • Keep records of purchase, sale, and improvement costs.
  • Report property sales accurately, even if exempt.
  • Consult an advisor before structuring real estate investments.

How the CRA Identifies High-Risk Businesses

The CRA uses data analytics, third-party reporting, and international information-sharing agreements to identify audit targets. Some common red flags include:

  • Large fluctuations in income or expenses year over year.
  • Persistent losses over multiple years.
  • Inconsistent GST/HST reporting.
  • Industry benchmarks showing higher-than-average discrepancies.

Practical Steps to Reduce Audit Risk

While no business can fully eliminate audit risk, you can reduce your chances significantly by following these steps:

  1. Maintain Proper Documentation – Keep invoices, receipts, contracts, and payroll records for at least six years.
  2. File on Time – Late or missed filings often trigger CRA reviews.
  3. Be Consistent – Ensure income, GST/HST, and payroll filings align.
  4. Seek Professional Advice – A tax advisor can identify risks before the CRA does.
  5. Respond Promptly – If the CRA contacts you, provide clear and timely responses.

Final Thoughts

The CRA’s audit priorities for 2025 emphasize fairness, transparency, and compliance in a digital economy. Whether you’re a small business owner, a corporate executive, or part of a multinational group, the key takeaway is clear: accurate reporting and proactive compliance are your best defenses against an audit.

At Multani professional Tax Services, Professional Corporation, we work closely with Canadian businesses to minimize audit risk and ensure compliance with the CRA’s evolving priorities. If you have concerns about your tax reporting or want to strengthen your audit readiness, our team is here to help.

Photo by Jacob Pretorius on Unsplash

Disclaimer:
The information discussed in this article is strictly general in nature and should not be construed as any sort of advice. If you have any particular questions regarding your personal tax situation, please feel free to reach out to me at sandeep@multanitax.ca