Tag Archives: Canadian Revenue Agency (CRA)

Recent Canadian and Quebec Tax Measures

During the week of March 23, 2020, the Canadian and Quebec governments announced a series of additional tax measures to further strengthen the economy in the wake of the ongoing COVID-19 pandemic. A number of procedural announcements relating to statutory deadlines and limitation periods have also been made by the Canada Revenue Agency (CRA) and Quebec Revenue Agency (Revenu Québec). A summary of these new measures is provided below. Summaries of previously announced measures may be accessed here (Canada) and here (Quebec).

Federal

Taxation of the Canada Emergency Response Benefit (CERB)

The federal government announced the introduction of the CERB on March 18, 2020. The CERB will provide a taxable benefit of $2,000 a month for up to 4 months to support workers (including self-employed individuals) who lose their income as a result of the COVID-19 pandemic. Following conflicting reports in this regard, the government confirmed on March 27, 2020 that the CERB will be taxable for claimants, but that no income tax withholding will be made on the CERB by the federal government.

Enhanced Temporary Wage Subsidy for Eligible Employers

On March 18, 2020, the federal government announced that a temporary wage subsidy (TWS) would be introduced for eligible employers in an amount equal to 10% of salary and other remuneration paid to Canadian employees. The stated purpose of the TWS is to help Canadians remain employed. It improves the cash flow of eligible employers (which include Canadian-controlled private corporations eligible for the small business deduction, individuals other than trusts, certain partnerships, non-profit organizations and registered charities) by allowing them to deduct the amount of the subsidy from periodic source deduction remittances payable to the CRA over the coming months. The maximum subsidy was initially set at $1,375 per employee, and $25,000 per employer.

On March 27, 2020, Prime Minister Trudeau announced that the amount of the TWS will be increased to 75% (as opposed to 10%) of salary and other remuneration paid to Canadian employees. It remains to be seen whether the maximum subsidy of $1,375 per employee and $25,000 per employer will be increased as well.

Further details in this regard will be provided once they become available.

Postponement of GST/HST Remittances

The federal government is deferring remittances of the following amounts to June 30, 2020:

  • Goods and Services Tax (GST)/Harmonized Sales Tax (HST) owing in respect of the February, March and April 2020 reporting periods, for monthly filers;
  • GST/HST owing in respect of the January 1, 2020 through March 31, 2020 reporting period, for quarterly filers; and
  • GST/HST owing in respect of the previous fiscal year and installments of GST/HST in respect of the current fiscal year, for annual filers whose GST/HST return or installment is due in March, April or May 2020.

This relief measure does not clearly address the situation of certain registrants, such as those who file on a quarterly basis but whose fiscal year-end is not December 31. Such businesses should contact the CRA to confirm whether they benefit from the deferral.   

The proposed measure also does not appear to extend the deadline for filing GST/HST returns.

Directors of corporate taxpayers should bear in mind that they may be held jointly and severally liable to pay any unremitted GST/HST, as well as any interest or penalties relating thereto.

Postponement of Import GST and Customs Duty Payments

The federal government has also announced that it is deferring the payment deadline for import GST and customs duties in respect of March, April and May statements of accounts until June 30, 2020.

Filing Notices of Objection with CRA

On March 28, 2020, the CRA announced that the deadline for filing notices of objection due March 18, 2020 or later would be extended until June 30, 2020.

Tax Court of Canada Procedures

On March 23, 2020, the Tax Court of Canada (TCC) released a Practice Direction and Order announcing that all sittings and conferences calls scheduled between March 16, 2020 and May 1, 2020 inclusively are cancelled and that the Court and its Registry offices will be closed until further notice.

The TCC also announced that it is suspending, from March 16, 2020 to May 1, 2020, the time limits provided for in the Tax Court of Canada Rules and any TCC orders and directions made prior to March 16, 2020.

The statutory deadlines for filing notices of appeal from income tax assessments and reassessments and GST assessments and reassessments continue to apply.  The notices of appeal required to be filed within these statutory deadlines must be filed electronically or by telecopier.  Where no statutory deadline applies, taxpayers are asked to wait and file their notices of appeal once the Court resumes its operations.

Quebec

Postponement of QST Returns and Remittances

In Information Bulletin 2020-5 dated March 27, 2020, the Quebec government announced that it would allow businesses to postpone the filing of Québec Sales Tax (QST) returns and the remittance of QST due between March 27, 2020 (inclusively) and June 30, 2020. As mentioned above, it does not appear that the equivalent federal relief measure extends the filing deadline for GST/HST returns. Given that Quebec taxpayers report GST and QST on the same return, it is not clear whether any substantial relief will be afforded to them from a reporting standpoint. Further information regarding the possible harmonization of the federal and Quebec relief measures is expected in the coming days.

Directors of corporate taxpayers should bear in mind that they may be held jointly and severally liable to pay any unremitted QST, as well as any interest or penalties relating thereto.

Acceleration of Tax Credits and Tax Refunds

In a press release dated March 27, 2020, Revenu Québec announced that it would accelerate the processing of tax credits and tax refunds claimed by businesses. No specific timeline has been announced in this regard.

Filing Corporate Income Tax Returns and Notices of Objection with Revenu Québec

Revenu Québec also announced in the above-mentioned press release that the deadline to take “administrative tax actions” (gestes fiscaux administratifs) will be extended to June 1, 2020.

The press release clarifies that this measure applies to corporate income tax returns that would otherwise be due between March 27 and June 1, 2020. Interest and penalties are therefore not expected to apply during such period in respect of such returns.

No further clarification is provided with respect to other administrative tax actions targeted by this measure. Although it may arguably include the filing of a notice of objection, absent specific legislative action or further clarification from Revenu Québec, it is recommended that taxpayers continue to file such notices by the 90-day statutory deadline to preserve their right to challenge any notice of assessment or reassessment.

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Tax and Real Estate – Tax Authorities Scrutinizing Real Estate Transactions

Following the Budget 2019 announcements, the Canada Revenue Agency (“CRA”) launched a Real Estate Task Force whose mission is to deter tax non-compliance in the real estate market.

 The federal government has allocated significant funds and resources to scrutinize real estate transactions in which parties have failed to comply with the appropriate regulations.

Here you will find a CRA questionnaire sent to selected individuals and corporations as part of the audit process. The questionnaire is broad, contains over 35 questions and requests significant documentation.

This real estate audit program is specifically aimed and can impact:

  • Promoters and developers for sales tax compliance;
  • Taxpayers involved in property flipping activities;
  • Taxpayers earning commissions in the real estate sector; and
  • Taxpayers reporting the sale of a principal residence.

In light of the foregoing, structuring and planning real estate transactions while ensuring tax compliance is of primary importance. If you have received a similar information requests, seeking legal guidance and advice is recommended before answering the questionnaire.

Nicolas Simard has extensive experience in every kind of tax litigation concerning income tax, consumption taxes and voluntary disclosure. He may be reached at 514-397-5288.


David H. Benarroch specializes in many areas of tax, including tax litigation, tax compliance and tax planning.

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Cryptocurrency Audits Have Begun

Forbes reports that the Canada Revenue Agency (“CRA”) has initiated audits in the cryptocurrency space, sending select taxpayers a lengthy and exacting questionnaire requiring information regarding the taxpayer’s investments, cryptocurrency purchases and sales, mining history, assets, wallets, and Initial Coin Offering (“ICO”) participation.

The initiative is part of the CRA’s underground economy strategy, which describes its general purpose as protecting the integrity of Canada’s tax system and limiting the reduction in tax revenues that results from, amount other things, the digital economy.

In a public statement, the CRA commented that in 2017 it developed a dedicated crypotocurrency unit. Unsurprisingly, in this statement, the CRA refused to provide any information on the specific information or criteria they use to select files for audit, though it has confirmed that it currently has over 60 active audit files in the cryptocurrency space.

The questionnaire asks about the history of the taxpayer’s involvement in the cryptocurrency space, investments, transactions with specific exchanges such as shapeshift exchange and changelly, use of cryptocurrency mixing services and tumblers, and the reasons for using such services. The questionnaire also inquires into cryptocurrency storage, requiring information about both hot and cold wallets, and requires detailed information on trading activity, the source of funds used in cryptocurrency activities, investments in ICOs, commercial transactions using cryptocurrency and mining activities.

The questionnaire describes itself as an ‘initial interview’ and alerts taxpayers that there may be follow up questions.

The CRA’s cryptocurrency audits follow the example of the Internal Revenue Service, who has been actively auditing the cryptocurrency space for several years and which won a partial victory in late 2017 when the United States District Court Northern District of California ruled that the San Francisco coin exchange Coinbase must supply the IRS with identifying information on all users who had more than $20,000 in any one transaction type (buy, sell, send, or receive) in any one year during the 2013 to 2015 period.

Despite the underground, ‘off the grid’ character of cryptocurrency, Canadians who have invested in cryptocurrency, or engaged in the space in any capacity, may have significant tax liabilities.

The CRA takes the position that cryptocurrency is not a form of money, but a type of property. Generally speaking, what this means is that cryptocurrency will be taxed like a commodity such as gold, and taxpayers are required to report all associated gains and losses.

If you have invested in cryptocurrency, if you have engaged in the space as a miner or trader,  if you have been paid in cryptocurrency or if you have participated in an ICO, regardless of whether you have gains or losses, we advise contacting a tax professional to discuss your exposure.

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Canada Without Poverty v. Attorney General of Canada

jonathan-denney-103328-unsplashOn July 16, 2018, the Ontario Superior Court of Justice delivered a major victory to Canadian charities that devote all or a portion of their resources to non-partisan political activities.

In Canada Without Poverty v. Attorney General of Canada, the Court held that non-partisan political activities constitute charitable activities for the purposes of the Income Tax Act (Canada) (the Act), provided that they are carried out in furtherance of an organization’s charitable purposes. Accordingly, a registered charity may devote significantly more than 10% of its resources to such activities, contrary to long-standing Canada Revenue Agency (CRA) policy.

This decision is of particular interest to registered charities that have been the object of increased audit activity from the CRA for having engaged in political activities. Depending on the specific circumstances at issue, the decision may forge a path to a successful outcome for those involved in administrative audits with the CRA or legal proceedings before the courts.

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Canada Life: The Denial of Rescission is a Troubling Decision for Taxpayers and Professional Advisors

pexels-photo-936722On June 21, 2018, the Ontario Court of Appeal handed down a decision in the case of Canada Life Insurance Company of Canada v. the Attorney General of Canada and Her Majesty the Queen in the Right of Ontario. This is a very troubling decision for taxpayers and their professional advisors. The facts are briefly as follows. The Canada Life Insurance Company of Canada (“CLICC”) and certain of its affiliates carried out a series of transactions and events in December 2007. The purpose of the transactions was to realize a tax loss to offset unrealized foreign exchange gains accrued in the same taxation year. The Canada Revenue Agency (the “CRA”) disallowed the claimed loss in the reassessment of CLICC’s taxes for 2007. Asserting that it had proceeded on the basis of erroneous advice from its tax advisor, CLICC applied to the courts for an order setting aside the transactions and replacing them with other steps retroactive to the date of the original transaction.

The problem arose because the tax loss was to be triggered by the winding up of a limited partnership. The mistake was that the general partner of the limited partnership, CLICC GP, was also wound up at the same time that the partnership was wound up. This resulted in the limited partner, CLICC, carrying on the business of the limited partnership alone within three months of the dissolution of the partnership.

CLICC originally applied for an order rectifying the transaction so as to move the winding-up of the general partnership from December 31, 2007 to April 30, 2008. The taxpayer was successful in its application before the application judge. However, the Attorney General appealed the decision. While the appeal was pending, the Supreme Court of Canada, in the case of the Fairmont Hotels,[1] overruled previous decisions which permitted rectification. The change in law restricted the scope of the equitable remedy of rectification to the correction of written agreements. Continue Reading »Facebooktwitterlinkedinmail