Author: Paul Casuccio

GST/HST Voluntary Disclosures – New Rules are Coming March 2018

office-1209640_1920On December 15, 2017, the Canada Revenue Agency (the “CRA”) released new guidelines on the rules applicable to voluntary disclosures that are made (or for which the name of the taxpayer is disclosed) on or after March 1, 2018.  Like the earlier draft guidelines, which were released on July 9, 2017, the new guidelines include a separation of the rules applicable to income tax voluntary disclosures and the rules applicable to disclosures of errors relating to GST/HST and other non-income taxes.  Below is a summary of the new voluntary disclosures program for GST/HST (“VDP”).


The voluntary disclosures program allows taxpayers to make disclosures to the Canada Revenue Agency to correct inaccurate or incomplete information, or to disclose information not previously reported. We understand there were concerns within the CRA that the existing program was overly generous to participants in the program (as compared to taxpayers who had been fully compliant), and proposals to revise the program have been in the works for some time now.  In this regard, the CRA issued an earlier version of the VDP guidelines for comments on June 9, 2017, with an initial proposed implementation date of January 1, 2018.

There was much speculation that this implementation date would be postponed, as well as  hope that the final guidelines would address concerns expressed by many tax practitioners that certain proposed measures in the June 9, 2017 version were too harsh and would lead to few taxpayers choosing to avail themselves of the program.  In the result, the new VDP guidelines includes significant improvements from the July 9, 2017 version.  As compared to the program that is currently in place, the new VDP is more beneficial for taxpayers in some cases, and worse for taxpayers in others.

VDP Categories

The new VDP includes three categories for disclosures, depending on the taxpayer’s circumstances.

Category 1 (GST/HST Wash Transactions Disclosures)

Category 1 disclosures include disclosures of errors relating to qualifying GST/HST “wash transactions”. This generally covers situations where a taxpayer who supplied goods or services fails to collect and remit tax as required, and the recipient would have been entitled to full input tax credits.  Wash transactions will continue to be eligible for full relief from interest and penalties under the new VDP. As for the relevant period, these disclosures will require disclosure of previously inaccurate, incomplete or unreported information for the four calendar years before the date the VDP application is filed.

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Canada’s Cannabis Taxation Regime

photo-1503262167919-559b953d2408There has been much speculation on how Canada will tax cannabis, which is expected to be legalized for retail sale in Canada by July 2018.  The much anticipated draft tax legislation was released by the Department of Finance on Friday November 10, 2017, and is out for consultation until December 7, 2017.

Proposed Tax Regime

Under the proposed cannabis tax regime, most supplies of cannabis will be subject to GST/HST (at rates currently ranging from 5-15% across Canada).  Cannabis, both for recreational or medical use, will also be taxed under the Excise Act, 2001 (Canada) (the “Act”), which currently imposes federal excise duty on spirits, wine and tobacco product made in Canada.  Both taxes on cannabis will be administered by the Canada Revenue Agency.

Similarly to the current GST/HST regime, the provinces and territories will be offered the option of joining the federal tax regime for cannabis taxation, in which case the excise duty on cannabis will be made up of the federal rate, plus an additional rate for the participating province or territory.  The division of tax revenues is currently under discussion between the federal government and the provinces, which will be responsible for controlling the distribution and retail sales of cannabis in each province.  In this regard, the federal government has indicated its goal of setting the maximum total excise duty rate at the greater of $1 per gram or 10 per cent of the sale price of the product.

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Final Deadline for filing GST/HST Section 156 Elections

For any taxpayer that made an election pursuant to section 156 of the Excise Tax Act before January 1, 2015, the final deadline for filing Form RC 4616 is December 31, 2015. Until this year, there was never a requirement to file any documentation with the Canada Revenue Agency (the “CRA”) when making this election, but due to changes announced in the 2014 Federal Budget, the election is now available in more circumstances, but with these new filing requirements.

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