Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: How transactions that are the subject of a ruling are audited
Position: See response
Reasons: See response
Tax Executives Institute, Inc.
Liaison Meeting
December 6, 2000
Question 7 - Audits of Transactions Subject to Advance Income Tax Rulings
The tax treatment of a transaction covered by an Advance Income Tax Ruling will generally be respected as long as the Audit Directorate confirms that the actual facts of the transaction conform with the representations in the taxpayer's ruling request. Increasingly, taxpayers find that the Audit Directorate is challenging the validity of Advance Rulings based on immaterial or insignificant discrepancies between the representations in the ruling request and the actual transaction. TEI believes that unless there is a material factual variance the ruling should be respected and auditors should not attempt to pursue revocation of the ruling; otherwise the credibility and utility of the rulings process will be undermined. We invite a discussion of this issue.
CCRA Response
Advance rulings are always given subject to the proviso that the facts as represented in the ruling are accurate and complete and that the transactions are carried out as described in the ruling. The rulings officer is not in a position to determine whether that is the case when a ruling is issued. It is therefore critical to the rulings process that the Agency be satisfied, through an examination by its auditors, that the material facts were accurately and completely stated in the ruling and that the transactions were carried out substantially as they were set out in the ruling. Our policy in this regard is set out in paragraphs 6 and 10 of Information Circular 70-6R3, Advance Income Tax Rulings. As the circular explains, it is only material omissions or misrepresentations in the statement of relevant facts or proposed transactions that will result in the ruling being considered to be invalid, such that the Agency would not be bound by it. The circular also explains that the auditor will discuss any concerns that he or she has regarding the validity of the ruling with the Income Tax Rulings Directorate. If a taxpayer disagrees with an auditor's determination that a ruling is invalid, the taxpayer should ask whether the auditor has discussed the matter with the Rulings Directorate.
File 2000-005651
December 2000
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