CRA recognizes the binding nature of audit settlement agreements

CRA has released its communiqué on audit settlement agreements (i.e., an agreement between the taxpayer and CRA for settlement of an audit issue). CRA recognizes that Rosenberg found audit agreements to be binding. However, CRA does not explicitly acknowledge the point made in Savics and the cases cited therein that, notwithstanding s. 169(2.2), “if a settlement-implementing reassessment is not in keeping with the agreement that the taxpayer and the fiscal authority have reached, a waiver of the right to appeal will not preclude the taxpayer from appealing in respect of the aspect of the reassessment that does not coincide with the settlement agreement.”

CRA recognizes the Galway principle, stating:

Auditors cannot contravene provisions of the ITA or ETA in negotiating and finalizing an audit agreement. They must assess taxes on the basis of the facts as determined, in accordance with legislation and [in a CRA editorial addition] CRA policies. This means that audit agreements normally relate to subjective audit issues.

In what may be a similar point, CRA also states that “Taxpayer relief requests are to be dealt with on their own merit separately and solely on the basis of the taxpayer relief provisions.”

Additional considerations arise in transfer-pricing disputes, where a Treaty mutual agreement procedure may be engaged.

Neal Armstrong. Summaries of AD-19-01 Audit Agreement and Waiver of Objection Rights Guidelines 2019-02-19 under s. 152(1) and s. 169(2.2).