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: Whether a tax debt that has been "written off" by the CRA remains payable by the taxpayer?
Position: The debt remains payable unless extinguished by another act (e.g., bankruptcy).
Reasons: There is nothing in the Act that allows the CRA to write off a debt. However, section 222 of the Act provides for a limitation period after which the CRA cannot take collection action to collect the debt.
XXXXXXXXXX
2013-050152
Jack Cao
Attention: XXXXXXXXXX
June 23, 2014
Dear XXXXXXXXXX:
Re: Federal tax debts over 10-years old
We are writing in response to your email of August 9, 2013, regarding the status of debts that have been written off by the Canada Revenue Agency (the "CRA"). As well, you asked for our views on the impact of the amendments to section 222 of the Income Tax Act (the "Act"). We apologize for the delay in responding.
You have advised us that your office acts as the trustee for a number of individuals (your "clients"). As trustee, one of your responsibilities is to ensure that your clients' tax debts are paid. You have asked us whether debts that are "written off" by the CRA must still be paid. You have advised us that you are not referring to situations where a taxpayer has declared bankruptcy and the debt is extinguished by operation of the Bankruptcy and Insolvency Act (the "BIA").
This technical interpretation provides general comments about the provisions of the Income Tax Act. It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R5, Advance Income Tax Rulings.
There are no provisions in the Act that permit the Minister to write-off a debt. Therefore, unless the taxpayer's obligation for the debt has been extinguished by the operation of another law (e.g., under the Bankruptcy and Insolvency Act), the debt remains due and payable by the taxpayer.
Notwithstanding that a debt cannot be written off, section 222 of the Act imposes a limitation period after which the CRA may not take collection actions to enforce the debt. Pursuant to subsection 222(4) of the Act, if the tax debt was payable on March 4, 2004, the limitation period began on that date, meaning debts that arose prior to that date remained collectible until at least March 4, 2014. Where a notice of assessment or a notice referred to in subsection 226(1) in respect of the tax debt is sent to or served on the taxpayer after March 3, 2004, the limitation period will begin on the day that is 90 days after the day on which the last one of those notices is sent or served. The limitation period can be extended pursuant to subsection 222(8) or restarted pursuant to subsection 222(5).
Pursuant to subsection 222(8), the limitation period is extended in certain circumstances where the Minister is precluded from taking collection actions (e.g., the matter is under appeal).
Subsection 222(5) provides that, unless the limitation period has otherwise ended, the limitation period can be restarted where any of the following occurs:
(a) the taxpayer acknowledges the tax debt in accordance with subsection 222(6);
(b) the Minister commences an action to collect the tax debt; or
(c) the Minister, under subsection 159(3) or 160(2) or paragraph 227(10)(a), assesses any person in respect of the tax debt.
Where a taxpayer has a debt owing, the CRA may take collection actions until the end of the limitation period (which as described above can be extended or restarted). Therefore, until the end of the limitation period or some other event occurs (e.g., bankruptcy), the debt remains outstanding and the CRA may take collection actions. After the end of the limitation period, the CRA may not take collection actions; however, the debt remains payable by the taxpayer and the CRA will accept payments on account of the debt.
Provided that your office is registered with the CRA as the authorized representative of your client, your office can contact the CRA to confirm whether your client has any unpaid amounts outstanding and provide details about the account.
We trust this information will be of assistance.
Regards,
Terry Young, CPA, CA
Manager, Administrative Law Section
International Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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