Certain TEI members fle refund claims with respect to excise tax on aviation fuel on the basis the fuel is for use as ships’ stores. Such applications for refunds are made with Form N-15, Excise Tax – Application for Refund. Historically, such aviation fuel suppliers have submited customers’ licences with Transport Canada in support of their claims. However, some members have recently been advised from certain Excise Audit teams that this practice will no longer be accepted. The view provided by the Excise Audit team was that only completed and stamped K36A – Ships Stores Declaration and Clearance Certifcate or ﬂight manifests from the customer would be acceptable. Impacted TEI members are concerned that tracking and managing of Form K36A for every single ﬂight would administratively burdensome and require increased resources. Further, ﬂight manifests may contain confdential or sensitive information which could pose difculties in sharing these manifests with the Canada Revenue Agency.

Question for CRA

(a) Can the CRA confirm that it will no longer accept customer licences as support for excise tax refund requests for fuel for use as ships’ stores and if so, can the CRA provide the reasoning for this shift in administrative policy?

(b) Aside from providing form K36A Ships' Stores Declaration and Clearance Certificate for each delivery, what alternative documentation could the dealer provide that would be acceptable to the Minister? What detailed information must be provided?

CRA response

(a)

If excise tax has been paid on fuel and, a dealer has sold the fuel for use as ships’ stores or the purchaser has used the fuel as ships’ stores, the dealer or purchaser may be eligible for a refund of an amount equal to the excise tax in accordance with section 68.17 or subsection 68.01(2) of the Excise Tax Act, respectively. As with other refunds under the Excise Tax Act, it is incumbent on the refund claimant to establish that it meets the conditions to be eligible for a refund under section 68.17 or subsection 68.01(2).

The Ships’ Stores Regulations, in particular, set out the legal test for determining whether goods used on board a conveyance are designated as ships’ stores for the purposes of a refund under section 68.17 or subsection 68.01(2) of the Excise Tax Act. For aircraft (excluding military aircraft), fuel and other enumerated goods are designated as ships’ stores if:

(i) the goods are used on board an aircraft operating internationally in the transportation of passengers or goods for reward

(ii) the aircraft is required to report exported goods to the Canada Border Services Agency (CBSA) pursuant to section 95 of the Customs Act; and

(iii) the aircraft is proceeding outside Canada.

For any refund claim made under section 68.17 or subsection 68.01(2) of the Excise Tax Act, the CRA must be satisfied that all of the above conditions are met to grant a refund. For this reason, the CRA may ask for supporting documentation from a refund claimant that demonstrates that the specific aircraft and its flight meet the conditions to be eligible for a refund. A claimant, for example, may submit a Form K36A, Ships Stores Declaration and Clearance Certificate or a flight schedule to demonstrate that the aircraft has proceeded outside Canada. To that end, the CRA does not accept copies of a regulatory licence or certification issued by Transport Canada or the Canadian Transportation Agency as they do not demonstrate that the aircraft proceeded outside Canada or that any other element of the legal test is met.

(b)

As discussed above, the CRA must be satisfied that the dealer sold fuel for use in an aircraft that is:

(i) operating internationally in the transportation of passengers or goods for reward;

(ii) required to report exported goods to the CBSA pursuant to section 95 of the Customs Act; and

(iii) proceeding outside Canada.

A Form K36A, Ships' Stores Declaration and Clearance Certificate and a flight schedule are examples of documentation that could support element (iii) of the legal test. However, the CRA may request additional documentation to ensure all elements of the legal test are satisfied.

The CRA does not maintain a master list of documentation that would be acceptable to support a refund claim under section 68.17 or subsection 68.01(2). Nevertheless, it should be noted that the CRA is amenable to accepting a variety of documentation provided that the documentation contains enough information to allow the CRA to verify that the claimant meets the conditions to be eligible for a refund.

Q.2 - Federal Fuel Charge and Renewable Propane (ETSD)

The term “renewable diesel” is not defined under the Greenhouse Gas Pollution Pricing Act (Canada) (“GGPPA”). On November 21, 2023, the Canada Revenue Agency (CRA) released RITS 9000111 specifying that any amount of renewable diesel blended with light fuel oil is subject to the Federal Fuel Charge rate applied to light fuel oil in Schedule 2 of the GGPPA for the relevant year.

Question for CRA

Can the CRA comment on how this would apply to renewable propane? For example, does this mean renewable propane would be subject to the Federal Fuel Charge rate applied to propane as set out in Schedule 2 of the GGPPA for the relevant year?

CRA response

We would like to clarify that RITS 9000111 interpretation is not extendable to renewable propane. The interpretation is in reference to a specific product and details concerning the product composition have not been made available publicly to protect the confidentiality of the requester. The CRA will publish shortly RITS 9000297 that addresses hydrogenation derived renewable diesel from a general perspective. As a reference, this interpretation will be more relevant to answer your question.

The GGPPA does not define the term “renewable” in regards to any fuel type, however renewable fuels may meet the definition of bio fuels. The GGPPA currently defines biodiesel, biogasoline, and biomethane, and the Fuel Charge Regulations define bio-aviation fuel. Substances meeting these definitions may be eligible to use the formulas found in subsections 8(5) to 8(8) that deem the quantity of fuel to be a reduced number of litres. There is not a definition for bio or renewable propane, nor is there a provision to deem the number of litres of propane to be a reduced quantity. Renewable propane would be subject to the Federal Fuel Charge based on the total number of litres and rate for propane as set out in Schedule 2 of the GGPPA.

Please note that the development of fuel charge policy is under the purview of the Department of Finance.

Q.3 - My Business Account and SLFIs (ABSB)

Despite the Canada Revenue Agency administering the GST/HST and QST for Selected Listed Financial Institutions (“SLFIs”), neither My Business Account nor Represent a Client allows SLFIs to electronically access up-to-date account activity information. This inability to gain up-to-date access to important information persists despite the fact that the QST was “harmonized” with the GST on January 1, 2013. In the past, when clicking on the link for account activity and balances taxpayers always received an error message that was vague, but now the error screen specifically states the following:

006- We cannot provide the information requested, as this service is not available for Québec Sales Tax (QST) account for Selected Listed Financial Institutions accounts. You can submit an enquiry through the Enquiries service. Go to the account Overview page, select “Enquires service” and then select “submit a written enquiry” (ref. code. VPAB006).

The lack of the ability to obtain balance and transaction activity electronically for SLFI accounts, especially when combined with CRA’s practice of transferring balances between program accounts automatically (i.e. balances are transferred from RT accounts to RC, RP, etc. and vice versa by CRA without notification to the taxpayer), impedes taxpayers’ abilities to manage not only their accounts, but also their compliance obligations. Because of this, reconciliation of RT accounts for GST and QST SLFI accounts requires a request for a paper statement (which often takes over a month to receive).

In addition to the time SLFIs must spend submitting requests for and waiting to receive copies of paper statements, SLFIs must also dedicate additional time to complete this work because often it is the case that different persons within a company, like a large SLFI, are responsible for the different taxes that fall under a particular program identifier account (e.g. a different person is charge of GST which falls under the “RT” program identifier than is in charge for corporate tax that falls under the “RC” program identifier). This situation is exacerbated when taxpayers have multiple taxation years-impacted due to outstanding rebate claims, court decisions, Notices of Objection or Audits.

Question for CRA

TEI members would like the CRA to provide a timeline on when we can expect to see the necessary systematic updates that would allow SLFIs to electronically access the necessary account information via My Business Account and Represent a Client.

CRA response

As you may be aware, the QST SLFI accounting activities are processed manually, therefore the information is not available in My Business Account (through the MyBA and RAC portals). The CRA and Revenu Québec continue to remain engaged in discussions on automating the QST SLFI process and progress has been made. We are confident that work will begin soon, however, we are not prepared to provide a timeline.

Q.4 - Authority for CRA to assess QST amounts in absence of legislation (CPB)

Budget Implementation Act, 2023, No. 1 (“Bill C-47”) amended the definition of “financial service” in subsection 123(1) of the Excise Tax Act (Canada) (“ETA”) in respect of payment card clearing services. The in-force provisions provided that such amendments were generally effective back to 1991 and provided the Canada Revenue Agency with one year from the date of Royal Assent to assess beyond the periods in section 298 of the ETA relating to this payment card clearing services in respect of GST/HST. Royal Assent was received on June 22, 2023.

In Bulletin 2023-3, the Government of Québec announced on April 6, 2023 that it would mirror such amendments for payment card clearing services in An Act respecting the Québec sales tax. An Act to give effect to fiscal measures announced in the Budget Speech delivered on 21 March 2023 and to certain other measures (“Bill 49”), which contained the payment card clearing services amendments for Québec Sales Tax, was introduced in the Québec National Assembly on February 8, 2024. Bill 49 was assented to on May 7, 2024. The in-force provisions of Bill 49 were similar to Bill C-47 in that it provided one year from the date of assent to assess QST in respect of payment card clearing services.

As the CRA is responsible for administering both GST/HST and QST for selected listed financial institutions (“SLFI”), CRA was the appropriate tax authority to audit and assess QST in respect of payment card clearing services for SLFIs.

Several TEI members were assessed by CRA for QST on payment card clearing services at the same time as assessments for GST/HST, however such assessments for QST occurred prior to the date of assent (May 7, 2024) of Bill 49. As a result, it is TEI’s view that such QST assessments were without proper legal authority and should not have been made until after the date of assent of Bill 49 – even if that meant CRA would have had to issue two different assessments (one for GST/HST and one for QST). However, given the retroactive nature of the payment card clearing services amendments, it gave registrants little choice but to pay the QST amounts as assessed or else be assessed interest on such assessments.

Question for CRA

Should a similar circumstance of differing effective dates between GST/HST and QST legislative changes arise in future, TEI respectfully requests that the CRA follow proper audit and legislative procedure and await the requisite legislative amendments receiving Royal Assent prior to raising any assessments of QST against SLFIs.

CRA response

The payment card legislation, as noted in the TEI question, had a number of unique characteristics, including retrospective application and the time limitations for reassessment. In keeping with the mirroring of the Quebec Tax Administration Act with the Excise Tax Act, and the intention (and adoption) of such legislation in Quebec, the CRA felt that it was within its legal rights to issue reassessments for both the GST/HST and QST. The CRA has taken note of the comments from TEI. Each future analogous situation will be examined on its own merits with regard to audit actions.

Q.5 - Authorized Signing Officer vs. Authorized Representative (FIRP & ABSB)

The Election or Revocation of an Election for Closely Related Corporations and/or Canadian Partnerships to Treat Certain Taxable Supplies as Having Been Made for Nil Consideration for GST/HST Purposes (RC4616) [i.e. the 156 election] is required to be signed by a person that is “authorized to file on behalf of the specified members…” The Canada Revenue Agency’s list of services for representatives of businesses (https://www.canada.ca/en/revenue-agency/services/e-services/represent-aclient/listservices-representatives-businesses.html) provides that Level 2, Level 3 and Legal Representatives access is required to be eligible to file an election.

In contrast, various other forms including the GST/HST Election Concerning the Acquisition of a Business or Part of a Business (GST44 form) [i.e. the 167 election] is required to be signed by a person that is “authorized to sign on behalf of the [supplier/recipient]”. Similar wording also appears on the Election and Revocation of an Election Between Agent and Principal (GST506) [i.e. the 177(1.1) election].

The wording “authorized to sign on behalf of the [company]” implies that the signatory must be a person that is authorized to bind the corporation under corporate law and not authorized with the CRA as a Level 2, Level 3 or Legal Representative.

However, our members have experienced CRA rejecting GST44 forms that are signed by persons authorized under corporate law to sign on behalf of the corporations on the basis that the signatory is not an authorized person if such signatory does not have Level 2 or 3 access with CRA. This is despite our members providing corporate resolutions evidencing the signatory is authorized to sign on behalf of the corporation.

Questions for CRA

(FIRP)

(a) Could the CRA comment on their view of the authorization required for a person to sign an election where the signatory is “authorized to sign on behalf of the [company]” and the reason for the inconsistent approach across the various on the type of forms with respect to what type of individual the CRA will accept as signatory?

(ABSB)

(b) Further could the CRA consider providing guidance that elections should be accepted if the registrant provides evidence that the signatory is authorized to sign on behalf of the registrant even if such person is not a Level 2 or 3 representative? CRA response

(a) Thank you for bringing this to our attention. We are currently looking into it. We do not have any comments at this time.

(b) The following GST/HST elections are processed by our business enquiries correspondence section: GST44 ; GST74 ; GST26 ; GST27 ; GST31; and GST287.

The type of documentation required to update our system depends on the authorization involved. To update representatives, a completed Form AUT-01, Authorize a Representative for Offline Access must be included with the election form. To update owners, partners or directors, please refer to the following page on our website: https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/changes-your-business/change-owner-partners-directors.html.

For agents to approve these elections, the person(s) signing the form must be an owner or director listed on our system, or an authorized representative listed on our system with at least Level 2 access. Although the signatory may in fact be authorized under corporate law, agents will only process the election if the signatory is listed on our system.

If documentation/evidence is provided with the election form indicating that the signatory is authorized on behalf of the registrant, the election may be accepted if the documentation is sufficient to update our system. However, if the documentation isn’t sufficient, the election will not be accepted. Please note that in either case, the processing of the election will be delayed.

We will review our internal procedures and communications to ensure the processing of the above-mentioned election forms is consistent with the above response.

Q.6 - Canada Revenue Agency inquiries regarding Excise Tax for imported insurance (ETSD)

TEI members are receiving inquiries from the Excise Tax division of the Canada Revenue Agency regarding insurance policies that are believed to have been acquired from non-resident insurers. The non-resident insurers have declared specifc policy numbers in a fling with CRA that is suggestive that the federal excise tax (“FET”) has not been paid in respect of such policies. The inquiries from CRA are extremely vague, do not reference policy numbers, nor the value of premiums. CRA agents have noted it would be a breach of confdentiality if additional information were to be disclosed. The lack of information is making it very difcult and time consuming for TEI members to seek confrmation from the local placing brokerages as to whether FET is applicable or had already been paid by another insurer or brokerage in the supply chain.

Question for CRA

Is the CRA able to provide clear communication with specificity going forward so that these matters can be addressed more expediently?

CRA response

Due to the nature of Part I of the Excise Tax Act (the Act), the CRA does not become aware of persons who have purchased a contract of insurance and who are liable for the tax until such time as the insurer/ broker return has been filed with the CRA. Under subsections 5(2) and 5(3) of the Act, the insurer/broker must file a return with the CRA and provide this information:

the name and address of each person resident in Canada with whom or on whose behalf the contract was entered into or renewed;
the net premiums paid or payable during the immediately preceding calendar year; and
the name and address of the broker or agent outside Canada through whom the contract was entered into or renewed.

The CRA relies on the information submitted by the insurer/broker in determining the taxes owing and the persons liable for the tax. The onus is on the insurer/broker to ensure the accuracy of the information that it reports on the insurer/ broker return before submitting it to the CRA. The CRA is aware that an insurer/broker may make errors in its reporting and understands that there have been barriers for identified taxpayers to seek assistance from the CRA to verify the veracity of the information reported by an insurer/broker due to the confidential nature of that information.

A similar question was raised at the 2021 TEI, with regards to erroneous information provided by an insurer/broker on the Form B241, Excise Tax Return - Broker, and the CRA has since updated its procedure to direct CRA agents to provide certain information to the identified taxpayer such as the name, the address, the phone number of the insurer/broker.During the September 2024 TEI, concerns were raised regarding the difficulty to get information such as the policy number or the amount owed. Since then, the CRA has explored possible resolutions while meeting our obligations to protect taxpayer information.

While CRA agents can already provide information to the identified taxpayer such as the name, the address, the phone number of the insurer/broker, the CRA has updated its procedure to direct CRA agents to provide additional information such as the policy number and amount owing to the identified taxpayer provided that they are an authorized representative with the CRA. In the case where the insurer/broker is an individual, the CRA will require the individual's consent prior to releasing information relating to the identified taxpayer.

This information will allow the identified taxpayer to contact the insurer/broker to clarify the information it reported on the broker return. While the CRA has no authority over any communication between the insurer/broker and the identified taxpayer, in the event that an error has been made and the CRA receives confirmation from the insurer/broker, the CRA will amend the return promptly.

Please note that the development of tax policy is under the purview of the Department of Finance.

Q.7 - E-invoicing update (CPB)

The Canada Revenue Agency has been engaged in a multi-year project reviewing the feasibility of adopting electronic invoicing in Canada.

Questions for CRA

(a) Could the CRA provide an update on this project and the current anticipated timeline?

(b) Additionally, does the CRA intend to engage and seek stakeholder input and comments? If so, when does the CRA intend to launch stakeholder engagement? TEI would be pleased to participate in stakeholder engagement sessions to ensure the adoption of any e-invoicing proposals works for both the CRA and businesses.

CRA Response

(a)

The Canada Revenue Agency (CRA) is advancing its understanding of e-invoicing to evaluate how it may be leveraged to enhance sales tax compliance within a Canadian context. The CRA continues to conduct extensive research to assess global trends, evaluate e-invoicing models in use, and analyze the drivers and adoption journeys of other jurisdictions.

The CRA provided a response to recommendation #3 of the Office of the Auditor General’s Report 10 – Specific Covid-19 Benefits which focused on the CRA assessing the value of implementing a real-time business revenue data requirement to improve the efficiency of the tax and programs administration.

The CRA commissioned a benchmark study to explore tangible tax and service benefits for e-invoicing adoption for Micro, Small and Medium sized enterprises. This study supported the work undertaken by the Agency to explore the impact of implementing a near real-time e-invoicing model on GST/HST programs.

(b)

The E-invoicing Initiative will focus on formulating the key decisions that would be required to determine the path forward should the Government of Canada wish to consider implementing an E-invoicing model in Canada. This work will involve:

Engagements with a broad range of stakeholders, including other government departments and agencies, to identify areas of alignment
Engagements with the provinces and territories to assess potential impacts on existing legislation and agreement s
Consultations with industry will be conducted to inform potential policy design

Q.8 - Update on FI bulletins (FIRP)

Taxpayers rely upon various Canada Revenue Agency publications to interpret complex legislation and regulations. Several of these publications have not been updated for more than 20 years, despite significant changes in the business environment (e.g., globalization, technological advances, and new products/services offerings).

At the 2019 TEI-CRA Liaison Meeting, the CRA provided the following update:

1. The following memoranda were being updated and anticipated that these would be available the following year:

GST/HST Memorandum 17.6, Definition of “Listed Financial Institution”
GST/HST Memorandum 17.6.1, Definition of “Selected Listed Financial Institution”
GST/HST Memorandum 17.14, Election for Exempt Supplies
GST/HST Memorandum 17.16, GST/HST Treatment of Insurance Claims

2. A new memorandum was being developed to replace GST/HST Memorandum 17-9, Insurance Agents and Brokers.

3. A new memorandum was being GST/HST Technical Information Bulletin, B-052, GST Treatment of Products and Services of Life and Health Insurance Companies. Our understanding is that the Canadian Life & Health Insurance Association provided its comments to the CRA in response to the CRA’s consultation on Notice 325: Services Provided by Certain Insurance Intermediaries in October 2023.

4. The following memoranda are also currently being updated, but we do not have an anticipated release date:

GST/HST Memorandum 17.7, De Minimis Financial Institutions
GST/HST Memorandum 17.8, Credit Unions

5. A new GST/HST Memorandum, 17.6.2, GST/HST Registration and Reporting Requirements for Listed Financial Institutions, Including Selected Listed Financial Institutions is being worked on to replace GST/HST Notice 265.

6. Updating the following memoranda are currently on our to-do list:

Memorandum 17.1, Definition of “Financial Instrument”
Memorandum 17.1.1, Products and Services of Investment dealers
Memorandum 17.2, Products and Services of a Deposit-Taking Financial Institution
Memorandum 17.10, Tax Discounters

At the time, the CRA indicated it planned to wait until proposed amendments, such as the addition of paragraph (f.1) to the definition of “financial instrument”, became law, before updating this memorandum.

Question for CRA

Could the CRA please provide an update regarding the timeframe for updates to these publications and the anticipated release dates?

CRA Response

As we have limited resources, creating new publications to address current issues or proposed, new or revised legislation are usually a higher priority than updating existing publications that still contain a signifcant amount of current and relevant information. Since the 2019 TEI-CRA Liaison Meeting, there have been numerous proposed, new and revised legislation that are the responsibility of the GST/HST Ruling Directorate that have impacted the updating of various GST/HST Memoranda related to fnancial institutions and fnancial services.

Please note that an updated version GST/HST Memorandum 17.14 was released in June 2023 and is now named “Election to Deem Supplies to be Financial Services and Related Election for Selected Listed Financial Institutions”. Updated GST/HST Memorandum 17.14 includes more information on the related second election available to SLFIs. As part of the update, the information in GST/HST Memorandum 17.14 that explained the closely related corporation rules in section 128 was removed and a new memorandum that discusses these rules was created since whether two corporations are closely related is important for other provisions in the Excise Tax Act, such as the election under section 156.

New GST/HST Memorandum 14.7, Closely Related Corporations, GST/HST Memorandum 14.5, Election to Deem Supplies to be Made for Nil Consideration, and GST/HST Memorandum 14.8, Closely Related Canadian Partnerships and Corporations for Purposes of Section 156 were also released in June 2023.

Since the 2019 TEI-CRA Liaison Meeting, other new publications have been released related to fnancial services such as:

GST/HST Info Sheet GI – 200: Application of the GST/HST to Credit Card Surcharges (March 2023)
GST/HST Notice 325: Services Provided by Certain Insurance Intermediaries (July 2023)
GST/HST Policy Statement P-257, Application of the GST/HST to New Home Warranties Issued by Insurers (October 2024)GST/HST Memorandum 17-11, 17-12 and 17-13 on ITC Allocation for fnancial institutions (July 2021).

Now that Notice 325 has been published, we are currently looking to see if there is still a need to update GST/HST Memorandum 17-9, Insurance Agents and Brokers. The following memoranda are expected to be released in 2025 and will include information on amendments proposed subsequent to the 2019 TEI-CRA Liaison

Meeting:

Updated GST/HST Memorandum 17.1, Defnition of “Financial Instrument”
Updated GST/HST Memorandum 17.6, Defnition of "Listed Financial Institution"• Updated GST/HST Memorandum 17.6.1, Defnition of "Selected Listed Financial Institution"
New GST/HST Memorandum, 17.6.2, GST/HST Registration and Reporting Requirements for Listed Financial Institutions, Including Selected Listed Financial Institutions (This memorandum will replace GST/HST Notice 265.) The following publications have been identifed as requiring updating:
GST/HST Memorandum:
- 17.1.1, Products and Services of Investment dealers
- 17.2, Products and Services of a Deposit-Taking Financial Institution
- 17.7, De Minimis Financial Institutions
- 17.8, Credit Unions
- 17.10, Tax Discounters
- 17.16, GST/HST Treatment of Insurance claims
GST/HST Technical Information Bulletin, B-052, GST Treatment of Products and Services of Life and Health Insurance Companies

Q.9 - Department of Finance Proposal to expand the Joint Venture Election Rules (FIRP & CPB)

The Department of Finance has released proposed section 273.01 of the Excise Tax Act (Canada) and commenced consultations with stakeholders and users of the Joint Venture Election. We understand that Canada Revenue Agency has also been consulted and provided input.

Proposed section 273.01, as drafted, contains filing requirements for the election to be filed with CRA for each joint venture. As CRA may already be aware, the energy industry consists of many thousands of joint ventures, where joint venture interests are constantly changing.

The energy industry is extremely concerned with the filing requirement as it causes undue burden on the industry, given the fluid nature of oil and gas joint ventures. The industry anticipates that the filing requirement will require dedicated resources to fulfill this requirement.

Questions for CRA

FIRP

(a) Given the volume of joint venture elections that will be filed with CRA will be in the thousands (which will also be subject to regular amendments given the fluidity of the joint ventures as described above), what is CRA’s position on the proposed requirement from the Department of Finance that all joint venture elections must be filed (and updated, as applicable) with the CRA?

FIRP

(b) If so, what is the policy intent of CRA and what is the outcome the CRA intends to achieve from the filing of these joint venture elections?

FIRP

(d) If the intended result is for the CRA or Parliament to have visibility into whether certain persons are engaged in a joint venture, whether it be as an Operator, Participant, or both, as well as the type of joint venture activity, would CRA consider alternative measures to achieve this outcome (i.e. a form of a questionnaire exercise that can be performed via MyBusiness account profile, or the filing of an annual information return by the Operator of a joint venture)?

FIRP

(e) Can the CRA provide any additional insight into whether it has concerns with the current or proposed Joint Venture legislation and whether additional input or information sharing from TEI members would be of assistance?

CPB

(f) Can the CRA provide details on the nature of the types of audit issues for which it is issuing assessments with respect to entities who utilize the current joint venture election under section 273 of the ETA?

Response from CRA

(a) It is the mandate of the CRA to administer the legislation as written by the Department of Finance.

(b) It is not the mandate of the CRA to determine the policy intent or the outcome that is intended from the filing of these joint venture elections. The mandate of the CRA is to administer the legislation as written by the Department of Finance.

(d) It is the mandate of the CRA to administer the legislation as written by the Department of Finance

(e) No comment

(f) We are unaware of any recent assessments regarding use of the current joint venture election under section 273 of the ETA. However, CRA Audit primarily focuses on the eligibility criteria of the registrants filing this, or any other, election.

Q.10 - Late Filing Penalty on Amended Return (ABSB)

Assumption: Assume a tax or information return was fled before the deadline as required under the provisions of the various statutes administered by the Canada Revenue Agency (i.e the Excise Tax Act, Greenhouse Gas Pollution Pricing Act, etc.).

Questions for CRA

(a) Where a person, registrant, taxpayer, etc., as the case may be, subsequently requests or makes an amendment to such a return (i.e. amended return), what is the CRA’s policy in respect of the imposition or assessment of a late fling penalty?

(b) Would there be instances where CRA may not take into account or consider the original fling date and treat the amended return as the proper fled date giving rise to the imposition or assessment of a late fling penalty?”

CRA Response

(a) Late fling penalties can only apply to the fling of returns. There are no provisions within the Excise Tax Act that provide for the fling of an “amended return”. Any requested adjustments/changes are requests for a re-assessment and therefore could not incur any late fling penalties. In the case at hand, the return was fled on time and any requests for re-assessment subsequent to the fling of the return would not incur any late fling penalties.

(b) No. See above.

Q.11 - Ability for digital Platform Operators to collect and remit GST/HST on supplies made by persons registered under Subdivision D of Division V of Part IX of the

Excise Tax Act (GOBI)

[Companion question also raised to Finance]

Persons registered for GST/HST under Subdivision D of Division V of Part IX of the Excise Tax Act (ETA) (Subdivision D) who make sales of qualifying tangible personal property supplies or specified supplies (collectively, “supplies”) through a digital platform operator (DPO) remain responsible for tax collection and remittance on those supplies. This means that DPOs have to rely on information provided by sellers to determine whether the DPO or the seller has the responsibility for tax collection and remittance on a particular supply. This creates complexity and a significant burden for DPOs who have had to implement systems logic and tracking to properly manage and report sales through the digital platform.

One mechanism that would simplify the collection and remittance of tax for marketplace sellers, DPOs, and the Canada Revenue Agency alike would be to allow DPOs to collect and remit GST/HST on sales of qualifying tangible personal property or specified supplies made through the platform, even for sellers that are registered for GST/HST under Subdivision D.

While there are several avenues that could be used to achieve this, one that could be handled administratively by the CRA without the need for legislation changes would be to allow DPOs that are registered under Subdivision D to include the prescribed information form subsection 177(1.1) into their agreements with sellers and have those agreements be accepted without the requirement of an electronic signature. Click-through agreements between DPOs and sellers are the industry standard and form the basis of the legal relationship between the two parties.

Pursuant to RITS 104816, the CRA does allow taxpayers registered under Subdivision D to include the prescribed information form subsection 177(1.1) in a form other than GST506, however, the ruling still requires electronic signatures. Requiring electronic signatures is difficult to scale for DPOs, particularly for those that have a high volume of sellers. The ability to imbed the certifications into part of a click-through acceptance agreement would be more reflective of how sellers and DPOs operate in practice. This approach would allow DPOs the ability to collect and remit GST/HST on all supplies made through the digital platform, should they so choose. This would not only reduce the administrative burden for DPOs, but also for the CRA, particularly as it relates to audits of DPOs.

Question for CRATEI requests the CRA permit prescribed information from subsection 177(1.1) to be agreed to by form of click-through acceptance and remove the requirement for electronic signature.

CRA response

As stated in the GST/HST Interpretation for case number 104816 (Interpretation) referenced in the question, the parties may prepare their own document for the election between a principal and a billing agent for purposes of subsection 177(1.1) instead of using form GST506, Election and Revocation of an Election Between Agent and Principal (GST506).

When form GST506 is not used to make that election, the document must contains the prescribed information and clearly demonstrate to an auditor that each party has chosen to enter into the election, are aware of their obligations arising from making the election and that the election is still valid.

This Interpretation also confrms that electronic signatures for purposes of the election under subsection 177(1.1) are acceptable provided the electronic records exhibit the characteristics of reliability, integrity and authenticity, as required by paragraph 22 of GST/HST Memorandum 15.2, Computerized Records.

It would not be considered a valid election under 177(1.1) if the election is not signed electronically or by hand by both parties. A click-through does not meet the requirement of prescribed information.

Q.12 - Sales of intangible personal property by non-resident persons registered under Subdivision D of the Excise Tax Act (Canada), to non-resident, non-registrant recipients (CPB)

[Companion question also raised to Finance]

Supplies of intangible personal property (“IPP”) to non-resident, non-registrant recipients are zero-rated provided the conditions outlined in section 10.1 of Part V of Schedule VI of the Excise Tax Act (Canada) (“10.1”) are met.

Pursuant to GST/HST Memorandum 4.5.3, suppliers are required to collect, verify, and maintain evidence to support the zero-rating in 10.1 such as:

Online self-declaration by non-resident recipients that they are not registered for GST/HST under Division V.
Online self-declaration by recipients that they are non-residents of Canada along with comparing the declaration to a complete home address and the billing address or address of financial institution attached to credit card; or geo-location software
Verification that the purchaser is not in Canada at the time of purchase by the use of geo-location software.

As there is no distinction between non-resident suppliers and resident suppliers, these zero-rating evidence requirements equally apply to non-resident suppliers who are registered under Subdivision D of Division V and supply IPP to customers globally, including those in Canada.

Consider the following example:

A non-resident supplier who resides outside Canada supplies digital content to customers around the world.
The digital content is IPP (that is not intellectual property) and includes world-wide rights (including Canada)
Customers in Canada are able purchase and access the digital content.
The digital content is for non-commercial use.
Given the nature of these supplies of digital content and the manner in which the global economy operates today, the supplier may have many millions of customers throughout the world purchasing this content each year, or even each month.
Under the simplified GST regime (Subdivision E of Division II), the supplier needs only to consider application of GST/HST to customers who are determined to be located in Canada, pursuant to the applicable rules under Subdivision E.
Under the standard regime (Subdivision D of Division V), however, the non-resident supplier would be required to ask every customer worldwide to declare that they are not registered for GST/HST under Division D; that they are non-residents of Canada; and conduct the address and location verification checks or risk a large assessment by the CRA, otherwise the supplier would be required to charge GST/HST.

The impracticality of the evidentiary requirements needed to support the zero-rating conditions of 10.1 does not align with the reality of global e-commerce today. As a result, the evidence CRA requires to support zero-rating of 10.1 at minimum disincentivizes, and more realistically, is a barrier to non-resident suppliers who may want to expand operations to Canada. It may also result in non-resident suppliers blocking persons in Canada from purchasing or accessing content. The administrative burden created by the requirement to have online declarations is also problematic for resident suppliers IPP and may also be a barrier to resident suppliers offering their supplies of IPP to customers located outside of Canada.

While TEI understands the CRA’s ability to act is limited without legislative changes, the CRA can, however, consider changing its policy with respect to the evidence it requires to support the conditions of zero-rating to better reflect the modern reality of global e-commerce. TEI also understands that CRA auditors have accepted that a supply of IPP by a non-resident registrant to a recipient that is also outside Canada is zero-rated and have not required proof of self-declarations. This approach, however, is considered on a case-by-case basis only and offers no certainty to suppliers who are impacted.

Questions for CRA

(a) On the basis of the above, TEI requests CRA update Memorandum 4.5.3 and include additional indicators it considers acceptable to support the zero-rating under 10.1 and not simply require self-declarations. Specifically, TEI encourages CRA to consider relevant conditions in Terms & Conditions agreed to between suppliers and recipients to support zero-rating, such as Terms that prohibit the use of the digital content for any commercial purposes as an acceptable indicator that recipient is not registered for GST/HST.

(b) TEI also urges the CRA to permit suppliers to determine residency and location of purchase using address information or geo-location software and not to additionally require self-declarations for residency determination purposes.

CRA response

(a) Supplies of IPP to non-resident, non-registrant recipients are zero-rated at the time they are made provided the conditions outlined in section 10.1 of Part V of Schedule VI of the Excise Tax Act (Canada) (“10.1”) are met.

Definitionally, zero-rating does not apply to any Canadian recipient of the IPP supplier and furthermore, it does not apply to recipients who are regular GST/HST registrants.

The intended use of the IPP is not determinative of the tax treatment so the Terms and Conditions of sale would not be a practical indicator that the conditions of 10.1 are satisfied. For example, a GST-registered, non-resident may be the recipient of a supply of digitized content under terms that prohibit the use for any commercial purpose but the supplier cannot satisfactorily zero-rate the supply.

(b) Suppliers must verify and maintain satisfactory evidence that the supplies are made to persons that meet the registration, residency, and physical location criteria of section 10.1 at the time the supply is made.

Memorandum 4.5.3 states that the CRA will generally accept an online self-declaration with respect to residency and registration status of the recipient and that the CRA will accept the use of geo-location software as a method of verifying that an individual is physically outside Canada when the supply is made.

The CRA is open to other means of determining residency and location that registrants obtain in the ordinary course of their business that reasonably support the conclusion that a supply meets the requirements of section 10.1 (e.g. billing address, home address, payment-related information, IP address, etc.).

Q.13 - Introduction of acceptable error rates thresholds for determining assessments on CRA audits of product sales (CPB)

Many TEI members have business operations that include high volume sales of thousands, or even millions, of different products. For a variety of reasons, having a 0% error rate for taxes collected on sales of these products is simply not possible. Some of these reasons include the fact that retailers (suppliers) are often reliant on other parties, such as third-party vendors, distributors, or manufacturers to provide accurate information about their products to help the retailer determine how taxes apply on the retailer’s sale of the products to customers. At the same time, rules around how GST/HST apply to basic groceries, health products, etc. are complex and require deep diving into memoranda and rulings to ensure accuracy. It is simply not possible to undertake a thorough review of each and every product listed and search all applicable Canada Revenue Agency published guidance and rulings that may apply; even completing such an undertaking does not guarantee 100% accuracy with CRA’s interpretation of the legislation.

This case is particularly true for retailers that are also digital platform operators (“DPOs”) and have taken on considerable audit risk as a result of being deemed to be the supplier under Subdivision E of Division II of the Excise Tax Act (Canada) (“ETA”). Although paragraphs 211.23(2)(c) and 211.13(5)(c) of the ETA offers some protection for DPOs who rely in good faith on information provided by third parties to determine the taxability of a particular good, it is not clear how such paragraphs will be interpreted in practice and it will be difficult to rely on such paragraphs in the course of an audit, particularly where an audit sample could include millions of different transactions from a similar number of third-party sellers. It is clear more measures are needed.

Many TEI members have robust processes and internal controls and dedicate significant effort to ensure taxes are collected on their sales in accordance with the ETA and other relevant statutes. In such cases, despite selling thousands or millions of different products, error rates found by CRA auditors are a very small percentage of sales made by the supplier or deemed supplier. While suppliers are able to go back to recipients to collect GST/HST as a result of an audit assessment, retailers (suppliers) or DPOs (deemed suppliers) who make sales to consumers are generally not able to take advantage of this ability to offset assessments of GST/HST on product sales.

Question for CRA

TEI requests the CRA adopt an innovative, modern approach to audits that recognizes 100% accuracy is simply not possible and introduces reasonability thresholds for error rates within acceptable tolerances for suppliers and deemed suppliers who can demonstrate the instance of strong internal controls.

There are several mechanisms that could be used to achieve this goal. One example would be to introduce tiered tolerance thresholds that offer relief that is commensurate to the number of different products sold by a particular supplier or deemed supplier. For example, a supplier or deemed supplier who sells greater than ten million products, may be afforded a higher error rate (i.e. 2.0%) than a retailer who sells fewer than ten thousand different products (e.g. 0.2%). Should a supplier or deemed supplier demonstrate that they have proper internal controls and produce an error rate equal to or under the error rate tolerance based on the number of different products sold (e.g. error rate of less 1% or less), the supplier or deemed supplier should be afforded some relief of any assessment with respect to incorrect taxability on such product sales. Alternatively, the CRA could consider allowing a certain fixed percentage of relief to offset any assessments of GST/HST on sales such as a supplier or deemed supplier not being liable for [X%] of the amount GST/HST that the supplier or deemed supplier fails to collect or inaccurately collects on sales. However, in no event shall the error percentage in and of itself allow the supplier or deemed supplier a refund of GST/HST on such sales.

TEI would welcome the opportunity to work with the CRA to develop a fair and reasonable framework that reflects not only best practices of the aforementioned approaches seen globally, but also the nature of commerce and sales in modern society. Adopting such an approach also promotes the establishment and enhancement of internal controls around product tax determination by suppliers and deemed suppliers. Working co-operatively with the CRA, TEI would seek to minimize any fiscal impact by helping to establish clear guidelines and defined criteria that can be understood by suppliers and deemed suppliers and applied by auditors, allowing CRA to focus time and resources on more high-risk areas prone to evasion activities.

CRA Response

The CRA has a risk based approach to auditing all taxpayers and it is extremely challenging to review every invoice, especially for larger sized registrants, where there is a potential GST/HST impact.

Auditors must set and consider materiality levels for individual as well as cumulative errors found during an audit. The auditor may decide not to adjust for an immaterial amount, but instead document and explain the issue to assist the registrant with future compliance.

With respect to “digital platform operators” (DPOs), the CRA has been conducting validation audits on a select population of DPOs to identify deficiencies in their business systems and where deficiencies are found, our audit staff have notified those DPOs so that corrective action can be taken. Unless there is egregious behavior noted by Audit, there are to be no assessments issued for any errors made by the DPOs during the validation audit process. The majority of validation audits will be completed by the spring of 2025.

The CRA has noted the comments made by TEI and would welcome additional comments on audit processes currently carried out by CRA Audit in order to improve efficiencies.

Q.14 - Improvements to the CRA’s GST/HST Registry search [Companion question also raised to Finance] (ABSB)

TEI, along with other representative bodies, has for many years been requesting improvements be made to the Canada Revenue Agency’s GST/HST Registry search (the “Registry”) to make the tool more usable and fit for purpose. These requests have included (1) changes to allow for the use of Application Programming Interface (“API”) so that GST/HST numbers can be validated simply by searching by the GST/HST number provided; (2) that the Registry does not return a valid result if the GST/HST number entered is tied to a GST/HST registration under Subdivision E; and (3) the API allow for bulk searches.

At the time of TEI’s last request on this matter in 2022, the Department of Finance communicated that this issue was the domain of the CRA. However, when presented with the same request, the CRA responded that it was unable to make such changes due to the privacy or confidentiality provision of the Excise Tax Act (Canada).

Questions for CRA

(a) Has CRA sought an opinion from the Department of Justice whether requested amendments by TEI and other stakeholders across Canada would infringe the privacy or confidentiality provisions of the ETA? If not, would the CRA commit to seeking an opinion from the Department of Justice, whether the disclosure of a particular GST/HST registrant’s name and registration status on a specific date, would result in the contravention of the confidentiality provisions of the ETA?

(b) Where such disclosure of GST/HST number and registration status infringes on the confidentiality provisions of the ETA, TEI requests CRA and the Department of Finance to jointly make any required legislative and administrative amendments to create a more usable GST/HST Registry search tool similar to what is commonplace and standard throughout many other VAT jurisdictions, including Québec, with the objective of meeting government’s goal of tax compliance (i.e. fraud prevention on collection of GST/HST, detecting carousel schemes, etc.).

CRA Response

There are legal implications that need to be reviewed and considered prior to pursuing any legislative amendments. CRA is open to changes, if feasible, and would work with Finance on any proposed legislative and/or administrative amendments. It should be noted that Quebec is subject to a different legislative framework than the federal government’s GST program.

Q.15 - Audit Discussion (CPB)Questions for CRA

(a) Can the Canada Revenue Agency provide comments on the top 5 areas of interest that the Audit Division has come across and/or identified that lead to longer audit times?

(b) In addition, could the CRA provide suggestions to TEI members to increase the efficiency of such audit work.

CRA Response

(a) Audits have always been, and continue to be, impacted (positively and negatively) by a number of factors which include increased complexity and ongoing legislative amendments to the Excise Tax Act, shifting in the economic landscape from bricks and mortar businesses to electronic commerce, increased complexity of businesses and large multinational enterprises, increasing volume of data that Audit needs to absorb and analyze, and audit staff resources and levels of experience.

(b) The CRA recognizes the need for businesses to operate in an economically effective manner. However, the GST/HST Audit function has noted that there have been challenges with industry in making resources available to deal with audit enquiries in a timely manner which causes lengthier than expected audit times.

Q.16 - Duty Refunds for Re-working or Destroying Cannabis (ESTD)

Under section 158.16 of the Excise Act, 2001 (Canada), a cannabis licensee may only re-work or destroy a cannabis product in the manner authorized by the Minister. Further, when applying for a refund under section 187.1, the Minister will only refund to the duty paid on a cannabis product that is re-worked or destroyed if it is done so in accordance with section 158.16 and applied for within two years from the date of destruction.

Certain provincial boards (i.e. customers) suggest that the provincial board be responsible for destroying cannabis products as it is cheaper for the provincial board to destroy the products on site rather than have them shipped back to the supplier. However, this eliminates the ability to apply for a refund under 187.1 of the Excise Act, 2001 (Canada).

Question for CRA

Would the CRA approve a method that involves destruction of the cannabis product by a provincial board provided it was pre-approved and notified of the destruction beforehand?

Response from CRA

Yes. The CRA would allow for a provincial board to destroy cannabis products on behalf of a cannabis licensee, if this is the cannabis licensee’s approved manner of destruction for purposes of section 158.16. Any method of destruction to be used by a cannabis licensee, including destruction by a provincial board, must be submitted to the CRA for approval before it is implemented. The CRA must be notified, by the licensee, prior to any destruction taking place and the CRA may choose to attend the provincial board site to witness the destruction. A claim for the refund of duty under section 187.1 may only be made by the cannabis licensee. The cannabis licensee must provide all documentation required, when requested, to support a claim for refund of the duty for the destroyed cannabis products.

It should be noted that an approved method of destruction would belong to the individual cannabis licensee, not the provincial board. Therefore, if multiple licensees would like to implement a method of destruction by a provincial board, each licensee would be required to request approval from the CRA. In other words, the provincial board would not have a blanket approval and there is no guarantee that every cannabis licensee requesting the destruction process would receive approval. Other factors, such as past compliance history of the cannabis licensee, would factor into the decision to approve or reject a method of destruction.

Q.17 - Audit Timelines (CPB)

TEI members seek clarity on the expected timelines in current GST/HST audits. Recent communications have been that responses to audit inquiries are required within 15 days, and an additional 15 days could be granted upon request.

Questions for CRA

TEI members would like to better understand the Canada Revenue Agency’s policy with respect to the following:

(a) Accounting and related data requests by the Computer Audit Specialist: Is there a general deadline for these requests? The CRA often requests tables from SAP and other software that are generally not accessible to an organization’s tax department. TEI members often require a number of months to gather this data in the formats requested by CRA.

(b) GST/HST auditor’s initial request for sales or purchase related documents. Is there a standard deadline to provide this documentation? An audit sample referencing hundreds of transactions is not uncommon, and the requests could come at a time when registrants have competing priorities that coincide with the audit timing and these documents often need to be provided by other departments in the organization. In the past, members have generally found CRA to be reasonable with the expected timeframes to respond. Can we continue to expect the same approach in the future?

(c) GST/HST auditor’s subsequent requests for sales or purchase related documents. As described above, depending on the number of documents being requested in the additional samples, and who in the organization will need to supply such documents, 15 days is not sufficient.

CRA Response

(a) The deadline for Computer Audit Specialist (CAS) requested data is the same timeline as set out by Communiqué AD-20-01, Standard Timelines for Information Requests to Taxpayers for Audit Purposes for a preliminary books and records request.

The CAS will often request source data tables/databases (i.e. SAP) as data in these formats is more complete, quicker to generate/provide on the taxpayer end, and easier and quicker to process by the CAS. It is understood that accounting/tax departments may not have direct access or permission to extract or provide these tables/databases, however, the CAS will recommend that they coordinate the request with their respective IT departments or software providers who can assist with extracting the data more efficiently. When CAS and taxpayer/registrants work collaboratively to understand the system data structures and schemas, additional efficiencies can be gained through the use of focused data queries that will extract the necessary fields required for the audit.

When accounting/tax departments must resort to exporting data in a report format (i.e. CSV, PDF, etc.), the process of providing the data to the CRA can become more manual, more labour intensive, and take significantly more time to provide to the CAS.

In all cases, the CAS are asked to maintain good communication with both the taxpayer/registrant and the audit team to obtain and provide the data as efficiently as possible, considering any special circumstances that may warrant extended deadlines.

(b) Communiqué AD-20-01, Standard Timelines for Information Requests to Taxpayers for Audit Purposes, provides guidance on the standard timelines for information requests to taxpayers for audit purposes. In order to treat taxpayers fairly, the complexity of the request, as well as the availability of the information requested and/or extenuating circumstances are considered when setting the initial response timeline. Where a taxpayer does not satisfactorily respond to the initial request by the deadline or requests additional time, then a follow-up request may be issued with a revised deadline. A request from a taxpayer for additional days past the initial deadline should be granted for factors or events that are outside of the taxpayer's control, such as illness, death, natural disaster, and may include a change in representative.

The initial deadline for providing requested books and records is up to 30 days and a follow up request may be granted if there are factors outside of the taxpayer’s control up to an additional 60 days. This extension must be approved by the auditor’s team leader or case manager. It is CRA's expectation that taxpayers will be able to satisfactorily respond to the majority of these requests by the initial request deadline. Open communication between the auditor and taxpayer is key to promoting efficiencies in the audit and will ensure that any required extensions are dealt with on a timely basis. Although current policy does not allow for additional days to be provided beyond the follow-up request extension, the CRA is monitoring the timelines set, and has noted the comments made by TEI.

(c) The standard timeline for subsequent requests for sales or purchase related documents depends on whether the information is readily available:

Where information is readily available, up to 15 days is provided, with the possibility of a 30 day extension.
Where information is not readily available, the deadline is up to 30 days with the possibility of a 30 day extension.
If information is not readily available and there are extenuating circumstances the initial timeline is up to 60 days.

The term "information not readily available" includes, but is not necessarily limited to, documents and/or information that are located outside the country, archived documents and/or information related to older tax years, or documents and/or information that are retrievable through complex searches. These criteria are not intended to be exhaustive and the auditor will use professional judgment when determining the proper initial timeline.

Q.18 - Vision and Priorities for the CRA’s GST/HST and Digital Compliance Directorate (CPB)

Question for CRA

We invite the Director General of the GST/HST and Digital Compliance Directorate at the Canada Revenue Agency to outline the CRA’s priorities for the next 12 months, the vision for the future of the branch and engage in discussion with TEI on how TEI can continue to provide feedback to and engage with CRA to achieve this vision.

CRA response

Sahil Behal, DG of the GST/HST and Digital Compliance Directorate responded to the question.

Q.19 - Pre-Approval of Input Tax Credit (ITC) Methodologies (CPB)

TEI members have shared with the Canada Revenue Agency the industry’s experiences with the administration of the current Pre-Approval Process and have proposed balanced solutions that would benefit all parties by reducing compliance, administration and collection costs while increasing certainty and efficiency.

The rationale behind the Preapproval Process was to streamline the application of the ITC rules for financial institutions and to provide certain direction regarding the different ITC allocation methods that can be used.[1] These rules were intended to provide compliance ease with respect to the GST/HST filings and minimize issues at time of audit of preapproved years.

It has been the industry’s experience that the compliance burden on the financial institutions has increased since the introduction of these rules, disproportionate to the actual tax involved and leading to uncertainty for the industry as a whole. As a result, the current renewal process is no longer about the approval of a methodology, rather it has become an audit of the ITCs that can be claimed as a result of the methodology. Specifically, under the current process there has been:

A lack of recognition of consistent allocation methodologies or business structure (operations);
An escalation in the level of detail and supporting documentation requested prior to granting preapproval,
The Preapproval Process has become a pre-audit; and
An overlap in timing between the Preapproval Process and other GST/HST compliance obligations.

To manage the burden of compliance as well as reduce the level of uncertainty on the financial services sector, below are a few recommendations to improve the current Pre-Approval Process:

Establish clearer guidelines to evaluate the particular methods: A particular method should be “fair and reasonable”. “Fair and reasonable” is an umbrella term covering a number of requirements. However, particular methods should reflect the “use or intended use” of the tax bearing goods and services; be able to react to future business changes; and be relatively simple to operate and audit. The CRA should not be permitted to preemptively determine that a taxpayer is not entitled to any ITCs in respect of such inputs by characterizing such a determination as an allocation methodology issue.
Establish guidelines to evaluate the particular methods: Guidelines should be introduced to allow for more flexibility to collaborate and suggest modifications. The rules permit modifications and the CRA should suggest the modifications within established guidelines.
Written communication with respect to decisions on particular methods should provide greater clarity to improve internal business processes: Providing written communication identifying the reasons as to why a particular method that is proposed by the taxpayer is not “fair and reasonable” or why a previously approved particular method is being questioned would be a valuable source of reference when assessing the appropriate modifications to reporting systems and future work efforts. This written communication would help drive improved productivity and efficiency for all parties.
Establishment of a central review area to ensure consistent application of rules and to develop procedures for resolving disputes: Central oversight to address disagreements that arise during the Preapproval Process would ensure more timely resolutions and allow stakeholders to optimize resources more appropriately. One option to consider is the use of the Appeals Directorate or the GST/HST Rulings Directorate in Ottawa where the views of the industry and CRA could be presented.
Maintain the Preapproval Process at a higher level that focuses on the overarching principles and overall method: Increase the efficiency of the Preapproval Process by limiting the review to be centered on overarching principles and an overall method rather than delving into granular details of the ITC entitlements the particular method would generate. For example, details on which tax amounts get allocated to specific divisions or whether tax amounts should fall into a bucket of an exclusive input or direct input is a question of audit and should have no impact on whether a methodology is “fair and reasonable”. In order to facilitate the review process, taxpayers could provide a written description rather than the MS Excel version of the last return, so that the written description is approved rather than the MS Excel worksheet calculations.
The Preapproval Process and the audit of a taxpayer should not be performed by the same auditors: Assigning different teams will prevent the Pre-approval Process continuing to be a pre-audit of the ITC allocation methodology for the future financial year.
Waive the annual requirement to file an application to use a pre-approved method where there are no changes from a method used in the prior year: Alternatively, consideration could be given to authorizing the use of a pre-approved method for three to five years with the condition that the reapplication for use of a pre-approved method for a particular fiscal year would arise where there is a material change in the business structure that would impact the ITC methodology. This proposed solution may need to be discussed with the Department of Finance.

Question for CRA

Would the CRA consider incorporating any of recommendations previously discussed and shared with the CRA by members of the financial services sector.

CRA Response

The CRA thanks TEI for its comments related to the Input Tax Credit Pre-Approval Process. We will discuss the proposals presented within CRA Audit and other internal stakeholders. Once this is underway, we would be open to having an opportunity to discuss each proposal in greater detail with TEI members.

Q.20 - Follow up on 2023 Q10. CRA My Business Account and Represent a Client Services Use for Authorizations (ABSB)

In response to Q10 at the 2023 liaison meetings regarding challenges that TEI members have regarding authorizations and access, the Canada Revenue Agency indicated that it is exploring other methods for taxpayers to submit information and would be in a position to provide an update. Since the 2023 meeting, TEI members continue to struggle with these areas.

Question for CRA

Could the CRA provide an update on any enhancements in this respect and if there are any particular areas of additional input and feedback TEI can provide to facilitate improvements to authorizations and access? We repeat the question below for convenience:

10. CRA My Business Account and Represent a Client Services Use for Authorizations

Similar issues have been raised in prior year’s Liaison meetings. The new procedures to set up online access with the Canada Revenue Agency for new entities or newly acquired entities are causing increased frustration for TEI members. The processes are often not practical for large corporations and make it extremely difficult/burdensome to get CRA online access given directors of corporations are not involved in the tax functions of corporations. In addition, the short time limit set for a director to access the online approval to give authorization can expire before authorization is provided.

In some cases, taxpayers have provided a list of officers of the corporation along with a valid power of attorney for the VP tax along with corporation documents. However, TEI members have found it can often take several weeks to a month to get these documents processed by CRA before the VP Tax is provided access to further provide someone else with Level 3 access.

Question for CRA

TEI understands the needs to protect taxpayer information and ensure only properly authorized persons are granted access; however, TEI members propose CRA consider setting up a special business online portal where large businesses could submit the required corporate information for streamlined review rather than faxing the information into the Tax Centre. TEI would not envision this particular online portal as requiring authorization to submit initial corporation documents. TEI would appreciate a status update from CRA.

CRA response

On updating directors and officers:

Our “Access to corporate tax information” page provides information on how to update corporation and director information, as well as how to add the SIN of a director to enable online access.

When there is a change of control or acquisition, we depend on the client to inform CRA.
It should be noted not all corporate registries share or maintain officer information, so requests to update officers can also be submitted to the CRA.
- Requests to add officers of a corporation need to be accompanied with official documentation, signed and dated by a director or officer already listed on the business as an authorized person in the organization to validate the update request. In addition, the CRA may contact an existing director or officer to validate the request.
- In addition, if the officer requires access to My Business Account, they should also provide their SIN to be added to the account.
Anyone with access to Represent a Client can use the Submit Documents service to upload a signed request to update corporation and director information, even if they do not currently have access to the business account.
Non-resident directors need to take the extra step of informing the CRA of their non-resident status. It is important to ensure residency information is correct and up-to-date to avoid delays. Incorporating authorities do not normally provide it as part of the information they send to the CRA.

The CRA has recently implemented the Document verification service to Verify your identity without waiting for a CRA security code, giving taxpayers full and immediate access to the CRA sign-in services.

To learn more about this service and registering for and managing sign-in services, you can go to the “Help with using the CRA sign-in services” page.

We are planning to implement changes in My Business Account that will enable owners including officers and directors to associate their SIN to business accounts that will also make obtaining online access easier. (Projected to be launched in May 2025)

On Authorizations:

Business owners including officers and directors can designate a delegated authority within their organization, such as a financial officer, to deal with tax matters on their behalf. To do this, the owner or director needs to sign in to My Business Account at least once to authorize this person as a level 3 delegated authority.

The CRA requires the consent of a taxpayer before disclosing or allowing access to a tax account. That is why we have implemented enhanced security measures as part of the process to obtain authorized access to accounts through Represent a Client.

The protection of taxpayer information is the utmost importance to the CRA and we strive to offer a balance between service and security. The CRA continues to engage stakeholders and monitor new technology such as the document verification service that may offer changes that will provide another service option without impacting the security of taxpayer information.

Q.21 - Follow up on 2023 Q8 – GST/HST Objection Timelines and New Audits on Same Issues

While there was a general discussion at the 2023 TEI liaison meetings on this question around GST/HST Objection Timelines and New Audits on the Same Issues, TEI is still awaiting a response to this question.

Question for CRA

Could CRA provide a response. We repeat the question below for convenience:

Q8. GST/HST Objection Timelines and New Audits on Same Issues

CRA’s website states that it may take over 500 days on average to resolve high complexity GST/HST objections. TEI members are aware of objections taking over 1,000 or even 1,500 days before getting resolved, meaning that a new CRA GST/HST audit often starts without the objection related to the previous GST/HST audit having been resolved.

Questions for CRA

What does the CRA consider as a reasonable delay to resolve a high complexity objection? When a new audit starts while an objection related to the previous audit is still unresolved, is there a way for the CRA to prioritize this file and expedite the process so that the taxpayer (and the CRA auditor) can have some clarity regarding the issues which were included in the objection? Can CRA share some statistics regarding the delays to resolve high complexity objections (number of files currently being handled by CRA, minimum and maximum delays, etc.)?

CRA response

The Appeals Branch, CRA continues to work diligently to improve the timely resolution of our GST-related objections. However, at this time, there are no updates to provide since our last discussion in November 2023.

We welcome any comments or feedback that you would like to share and repeat our invitation to meet with you regarding the appeals and objections process.

Q.22 - Follow up on 2023 Q9 – Proactive Communications Request for My Business Account Issues (ABSB)

In response to Q9 at the 2023 liaison meetings regarding TEI’s request for proactive communications to technical issues impacting My Business Account, the Canada Revenue Agency mentioned it would review protocols for advising stakeholders on major issues to see if further information can be provided.

Question for CRA

Could CRA provide an update on the review of such protocols and if there any particular areas of additional input and feedback TEI can provide to facilitate this review?

CRA Response

When there are system-related issues in the CRA portals, we have communication protocols in place to advise users as soon as possible. Notifications may include error messages, social media posts, and/or banners placed on web pages or the applicable portal (i.e. My Business Account). We regularly review our protocols and are currently working on expanding our service interruption communications protocols.

It is important to note that due to the varying nature and unpredictability of system-related issues, it can be a challenge to provide a response that covers every scenario. In most cases, the CRA requires time to accurately identify the extent of an issue and its impact on users, before we can appropriately advise those impacted.

We appreciate and value receiving feedback from our users. When they tell us they are experiencing issues, it can help us identify and deal with the matter more quickly. We will continue to explore how we can improve the process for all users.

Q.23 - Follow up on 2023 Q13 – Collections Resulting from Desk Audits of Joint Filing Registrants under Subsection 228(7) (ABSB)

While there was a general discussion at the 2023 TEI liaison meetings on this question around collection action caused by desk audits of joint filing registrants, TEI is still awaiting a response to this question.

Question for CRA

Could the Canada Revenue Agency provide a response. We repeat the question below for convenience:

Q.13 Collections Resulting from Desk Audit of Joint Filing Registrants under Subsection 228(7)

Subsection 228(7) of the Excise Tax Act (Canada) allows closely related corporations, that meet the prescribed circumstances and conditions in the Offset of Taxes (GST/HST) Regulations, to elect for net tax payable of one corporate registrant to be reduced or offset against a net tax refund of a related corporate registrant within the same closely related group.

Despite a 228(7) election in place, some members have found that the Canada Revenue Agency will treat net tax payable that was net against a net tax refund to be short paid and send to collections when the GST/HST return for the net tax refund is under desk audit. The result is interest levied against the amount of net tax payable that was offset against the net tax refund despite s. 228(7) and collection action taken for the balance.

Question for CRA

As neither s. 228(7) nor the Offset of Taxes (GST/HST) Regulations support treating the amount offset against the net tax refund as unpaid when under audit, could the Canada Revenue Agency consider changing its practice and only consider an amount offset unpaid if the net tax refund or a portion thereof is denied?

CRA Response

Once a GST303 Application to Offset Taxes by Refunds or Rebates and letter of direction are filed and approved by the GST/HST processing area, transfers made between closely related corporations are processed manually by business Accounting officers on a first in first out (FIFO) basis, and are normally processed within 14 calendar days. Transfers are processed with the original effective date of the credit, which may result in an interest adjustment to the account that has the debt.

If the result of an assessment for a particular legal entity is a debit balance, and the credit from a related entity which has been proposed to offset this debt has not been assessed, the CRA will continue to offset the debit with any credits available on the accounts of the particular entity in accordance with current legislation (ETA subsection 296(3) and section 318; ITA subsection 164(2)). No changes to this automated accounting process are being considered at this time.

Q.24 - Follow up on 2023 Q19 Request for information s. 288 and s. 231.1 (CPB)

At the 2023 liaison meeting, the Canada Revenue Agency and TEI had a very productive discussion surrounding mechanisms for registrants to respond to requests for information (“RFI”) electronically. Subsequent to the 2023 liaison meetings, TEI provided additional comments on the workability of the various mechanisms raised by the CRA. Since that time, TEI members have continued to experience interactions with auditors which do not reflect the expected engagement and mechanisms as described by the CRA in the 2023 response to this question. TEI appreciates CRA willingness to engage on this topic to find mechanisms that ease compliance with RFIs, particularly for registrants that may receive significant volumes for RFIs.

Question for CRA

Given the productive conversations to date, would the CRA be willing to create a working group with TEI and any other interested stakeholders on this issue?

CRA Response

The CRA is willing to have further discussions on the topic. We ask that TEI members bring forward their concerns and the CRA will ensure that the appropriate representatives are present.

1 New Release and Backgrounder - Canada's New Government Unveils Proposed Improvements to the Application of the GST/HST to the Financial Services Sector, January 26, 2007 (http://www.fin.gc.ca/n07/data/07-006_1-eng.asp)

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19 November 2024 TEI Roundtable

Q.1 - Federal Excise Tax Refunds for Aviation Fuel (ETSD)

Question for CRA

CRA response

(a)

(b)

Q.2 - Federal Fuel Charge and Renewable Propane (ETSD)

Question for CRA

CRA response

Q.3 - My Business Account and SLFIs (ABSB)

Question for CRA

CRA response

Q.4 - Authority for CRA to assess QST amounts in absence of legislation (CPB)

Question for CRA

CRA response

Q.5 - Authorized Signing Officer vs. Authorized Representative (FIRP & ABSB)

Questions for CRA

Q.6 - Canada Revenue Agency inquiries regarding Excise Tax for imported insurance (ETSD)

Question for CRA

CRA response

Q.7 - E-invoicing update (CPB)

Questions for CRA

CRA Response

Q.8 - Update on FI bulletins (FIRP)

Question for CRA

CRA Response

Q.9 - Department of Finance Proposal to expand the Joint Venture Election Rules (FIRP & CPB)

Questions for CRA

Q.10 - Late Filing Penalty on Amended Return (ABSB)

Questions for CRA

CRA Response

Q.11 - Ability for digital Platform Operators to collect and remit GST/HST on supplies made by persons registered under Subdivision D of Division V of Part IX of the

CRA response

Q.12 - Sales of intangible personal property by non-resident persons registered under Subdivision D of the Excise Tax Act (Canada), to non-resident, non-registrant recipients (CPB)

Questions for CRA

CRA response

Q.13 - Introduction of acceptable error rates thresholds for determining assessments on CRA audits of product sales (CPB)

Question for CRA

CRA Response

Q.14 - Improvements to the CRA’s GST/HST Registry search [Companion question also raised to Finance] (ABSB)

Questions for CRA

CRA Response

Q.15 - Audit Discussion (CPB)Questions for CRA

CRA Response

Q.16 - Duty Refunds for Re-working or Destroying Cannabis (ESTD)

Question for CRA

Q.17 - Audit Timelines (CPB)

Questions for CRA

CRA Response

Q.18 - Vision and Priorities for the CRA’s GST/HST and Digital Compliance Directorate (CPB)

Question for CRA

CRA response

Q.19 - Pre-Approval of Input Tax Credit (ITC) Methodologies (CPB)

Question for CRA

CRA Response

Q.20 - Follow up on 2023 Q10. CRA My Business Account and Represent a Client Services Use for Authorizations (ABSB)

Question for CRA

Question for CRA

CRA response

Q.21 - Follow up on 2023 Q8 – GST/HST Objection Timelines and New Audits on Same Issues

Question for CRA

Questions for CRA

CRA response

Q.22 - Follow up on 2023 Q9 – Proactive Communications Request for My Business Account Issues (ABSB)

Question for CRA

CRA Response

Q.23 - Follow up on 2023 Q13 – Collections Resulting from Desk Audits of Joint Filing Registrants under Subsection 228(7) (ABSB)

Question for CRA

Question for CRA

CRA Response

Q.24 - Follow up on 2023 Q19 Request for information s. 288 and s. 231.1 (CPB)

Question for CRA

CRA Response