8 August 2003 GST/HST Interpretation 46751 - Voluntary Disclosures and Limitation Period Exception for Claiming ITCs

Dear XXXXX:

Thank you for your letter XXXXX concerning a recipient's entitlement to claim an input tax credit (ITC) beyond the four-year time limit where the supplier has made a voluntary disclosure in respect of a failure to charge the Goods and Services Tax (GST)/Harmonized Sales Tax (HST). Your letter was forwarded to us for response.

Based on the information in your letter, we understand the scenario that you have presented as follows:

•   Over a number of reporting periods, a supplier did not charge GST/HST in respect of certain taxable supplies made to a recipient. The recipient would have been entitled to claim ITCs in respect of these supplies, subject to the documentary requirements and the four-year time limit.

•   The supplier made a voluntary disclosure and remitted the tax in respect of the above failure to charge and collect tax.

•   The Canada Customs and Revenue Agency (CCRA) issued a letter to the supplier indicating that the voluntary disclosure has been accepted as filed. A notice of assessment was not sent to the supplier.

•   To recover the GST/HST remitted under the voluntary disclosure, the supplier issued GST/HST only invoices to the recipient.

•   The recipient has not previously claimed ITCs in respect of theses supplies. At the time the supplier charges the tax, the four-year time limit for claiming some of the ITCs has expired.

Interpretation Requested

Can the recipient claim an ITC after paying the outstanding GST/HST to the supplier where the four-year time limit for claiming the ITC has expired.

Interpretation Given

Based on the information provided, the recipient is not entitled to claim an ITC in the above scenario where the four-year time limit has expired. One of the conditions for the exception to the four-year time limit provided under paragraph 225(4)(c) of the Excise Tax Act is that the supplier must disclose in writing to the person that the Minister has assessed the supplier for the tax.

Currently, under the Voluntary Disclosure Program, a notice of assessment is not automatically sent to the person making the disclosure. As indicated in your letter, the CCRA has the discretion to audit the period of the voluntary disclosure and issue an assessment. The CCRA is currently reviewing its procedures with respect to voluntary disclosures to address the situation raised in your letter. In the meantime, where such a situation occurs, the supplier may request that a notice of assessment be issued in respect of the voluntary disclosure. Once the notice of assessment is issued, the supplier may disclose to the person, in writing, that the Minister has assessed the supplier for the tax. As such, the recipient will be entitled to claim the ITC after the four-year time limit provided that all the other conditions for claiming the ITC are met.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of the GST/HST Memoranda Series, do not bind the CCRA with respect to a particular situation.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 954-2488.

Sincerely,

Marcel R. Boivin
General Operations Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate