Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: Where a director liability assessment under section 227.1 of the Act is appealed to the Tax Court of Canada, would the CRA agree to reassess or vacate the parallel amount of provincial tax liability to match that Court's result for the federal tax?
Position: This is the CRA's current practice.
Reasons: The legislation permits this practice.
XXXXXXXXXX 2012-044605
Katharine Skulski
August 9, 2012
Dear XXXXXXXXXX:
Re: Director's liability provincial component
This is in response to your email of May 3, 2012 inquiring whether in a situation where a director liability assessment under section 227.1 of the Act is appealed to the Tax Court of Canada, would the Canada Revenue Agency agree to reassess or vacate the related amount of provincial tax liability to match that Court's result for the federal tax.
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings. As noted in paragraph 7 of IC 70-6R5, the Canada Revenue Agency ("CRA") will not provide an advance ruling on a completed transaction. Where a situation involves a specific taxpayer and a completed transaction, the request should be addressed to the relevant tax services office. Although we cannot comment on your specific situation we are prepared to provide the following comments in respect of the issues that you raised. Please note, however, that these comments are of a general nature and are not binding on the CRA.
Unless otherwise stated, all statutory references in this letter are to the Income Tax Act, R.S.C. 1985, c. 1 (5th Suppl.) (the "Act"), as amended to the date hereof.
The Tax Court of Canada, in both Buckingham v. R., [2010] 6 C.T.C. 2183 (TCC) and Seier v. R., [2010] G.S.T.C. 146 (TCC), does state it is outside the jurisdiction of that court to make pronouncements over a provincial assessment. Although this may be strictly true, the solution proposed in your email reflects what is already the CRA`s practice.
Under Tax Collection Agreements between the Government of Canada and most of the Provinces and Territories, the CRA is responsible for assessing and collecting income tax for the Agreeing Provinces. The relevant provincial and territorial income tax acts contain provisions that mirror section 227.1 of the federal Act. Where a director is assessed in respect of source deductions under both the federal and provincial income tax acts and the assessment is appealed, the Crown`s pleadings are only in respect of the federal tax. Although the appeal to the federal courts relates only to the federal portion of the assessment, once the matter is adjudicated, the related provincial tax is adjusted to match any reduction or cancellation of the assessment ordered by the Court.
We trust that these comments will be of assistance.
Yours truly,
Terry Young, CA
Manager, Administrative Law Section
International Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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