REASONS FOR JUDGMENT
Favreau J.
[1]
This is an appeal from assessments made by the
Minister of National Revenue (the Minister) under
the Income Tax Act, R.S.C. 1985 (5th Supp.) c. 1, as amended
(the Act), dated November 6, 2012, in respect of the appellant’s 2010 and
2011 taxation years.
[2]
Under the November 6, 2012, assessments,
the Minister imposed a penalty under subsection 162(7) of the Act on the
appellant, in the amount of $1,500 for each taxation year, 2010 and 2011, for the
appellant’s failure to file T4 slips for 139 employees.
[3]
In making the assessments dated November 6,
2012, the Minister relied on the following assumptions of fact:
(a)
The appellant operates
a company specialized in merchandizing, sampling and display mounting for
big-box stores;
(b)
The appellant’s clients
are in Quebec and Ontario;
(c)
The appellant’s sole
shareholder is Richard Meunier Côté;
(d)
The appellant was
incorporated in 2010, but prior to that, the company had been operating under
the name of Entreprises Darik for over 10 years;
(e)
The appellant’s head
office is in Quebec;
(f)
The appellant’s
taxation year ends on December 31 of each year;
(g)
The duties of the
appellant’s workers consisted of putting up and taking down shelves, and
arranging and labelling merchandise;
(h)
The workers’ wages
varied between $10 and $13 an hour;
(i)
The workers were hired
and paid directly by the appellant;
(j)
The workers were
supervised by a team leader who was also employed by the appellant;
(k)
The place of work,
schedule and tasks were determined by the appellant;
(l)
Wages were paid weekly;
(m)
On February 18,
2011, the appellant filed 105 T4A slips in respect of the 2010 taxation
year with the Canada Revenue Agency for the workers;
(n)
On February 29,
2012, the appellant filed 70 T4A slips in respect of the 2011 taxation
year with the Canada Revenue Agency for the workers;
(o)
The appellant did not
file any T4 slips in respect of the 2010 and 2011 taxation years for the
workers by the time required by the Act and the Regulations; and
(p)
On or around
November 5, 2012, the Minister issued 11 and 69 T4 slips in respect
of the 2010 and 2011 taxation years, respectively, for the appellant’s workers.
[4]
In decisions dated July 6, 2012, the
Minister determined that, during the period from June 16, 2010, to
December 31, 2011, five of the appellants’ workers were employees and that
their employment was insurable under the Employment
Insurance Act, S.C. 1996, c. 23, as amended (the
EIA). These decisions were applied to all of the appellant’s 139 workers
(the workers). Under the assessments dated November 5, 2012, the
following amounts were claimed from the appellant:
|
Year
|
Employment Insurance
|
Penalties
|
Interest
|
Total
|
|
2010
|
$11,675.11
|
$1,167.61
|
$1,103.00
|
$13,945.72
|
|
2011
|
$8,230.06
|
$823.00
|
$361.00
|
$9,414.06
|
|
|
|
|
|
|
[5]
The assessments dated November 5, 2012,
were appealed before this Court, under docket No. 2013‑4177(EI).
[6]
The issues are the following:
(a)
Was the Minister correct in imposing a penalty
for failure to file T4 slips under subsection 162(7) of the Act in
respect of the 2010 and 2011 taxation years?
(b)
In the alternative, is the appellant liable to a
penalty for the late filing of T4 slips under subsection 162(7.01) of the
Act in respect of the 2010 and 2011 taxation years?
[7]
Subsections 162(7) and 162(7.01) of the Act
read as follows:
162(7) Failure to comply − Every person (other than a registered charity) or
partnership who fails
(a) to file an
information return as and when required by this Act or the regulations, or
(b) to comply with a duty or obligation imposed by this Act
or the regulations
is liable in
respect of each such failure, except where another provision of this Act (other
than subsection 162(10) or 162(10.1) or 163(2.22)) sets out a penalty for the
failure, to a penalty equal to the greater of $100 and the product obtained
when $25 is multiplied by the number of days, not exceeding 100, during which
the failure continues.
162(7.01) Late
filing penalty—prescribed information returns − Every
person (other than a registered charity) or partnership who fails to file, when
required by this Act or the regulations, one or more information returns of a
type prescribed for the purpose of this subsection is liable to a penalty equal
to the greater of $100 and
(a) where the number of those information returns is less
than 51, $10 multiplied by the number of days, not exceeding 100, during which
the failure continues;
(b) where the number of
those information returns is greater than 50 and less than 501, $15 multiplied
by the number of days, not exceeding 100, during which the failure continues;
(c) where the number of
those information returns is greater than 500 and less than 2,501, $25
multiplied by the number of days, not exceeding 100, during which the failure
continues;
(d) where the number of those information returns is
greater than 2,500 and less than 10,001, $50 multiplied by the number of days,
not exceeding 100, during which the failure continues; and;
(e) where the number of those information returns is
greater than 10,000, $75 multiplied by the number of days, not exceeding 100,
during which the failure continues.
[8]
The duty to file T4 slips is provided for in
subsection 200(1) of the Income Tax Regulations, which reads as
follows:
Every person who makes a payment described
in subsection 153(1) of the Act (other than an annuity payment in respect of an
interest in an annuity contract to which subsection 201(5) applies) shall make
an information return in prescribed form in respect of the payment unless an
information return in respect of the payment has been made under sections 202,
214, 237 or 238.
[9]
Among the payments described in subsection 153(1)
of the Act, salary, wages or other remuneration are specifically referred to in
paragraph (a) of this provision.
[10]
The time granted to file T4 slips is set out in
subsection 205(1) of the Income Tax Regulations, which reads as
follows:
All returns required under this Part shall
be filed with the Minister without notice or demand and, unless otherwise
specifically provided, on or before the last day of February in each year and
shall be in respect of the preceding calendar year.
[11]
The appellant did not file any T4 slips for the
remuneration paid to the workers even though it should have done so because the
workers were employees for the purposes of the Act, as confirmed by the
decision of this Court rendered today in the appeals of Maxim Meunier (2013-3117(EI)),
Richard Meunier (2013-3120(EI)), and 7547978 Canada Inc. (2013-3121(EI),
2013-3122(EI), (2013-4177(EI)).
[12]
The appellant filed T4A slips in respect
of the 2010 and 2011 taxation years with the Canada Revenue Agency for the
workers, but these slips were incorrect because the remuneration paid to the
workers was described as being “Self-employed commissions”
or “Fees for services” rather than as employment
income and because the expense reimbursements, such as
meal allowances, travel expenses, and cash advances made to the workers, were
included as being part of the income earned.
[13]
The Canada Revenue Agency cancelled the T4A
slips prepared by the appellant and issued T4 slips to all the workers, who
were reassessed on the basis of the T4 slips.
[14]
Since the appellant failed to file T4 slips for
its employees by the time required under section 205 of the Income Tax
Regulations, the Minister was justified in imposing the penalty provided in
subsection 162(7) of the Act in respect of the 2010 and 2011 taxation
years.
[15]
For these reasons, the appeal is dismissed.
Signed at Ottawa, Canada, this 7th day of May 2015.
“Réal Favreau”
Translation certified true
on this 15th day
of June 2015
Johanna Kratz, Translator
Email this Content