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 CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues: Is the date for the calculation of the corporate late-filing penalty under subsection 162(1) of the Income Tax Act extended by the application of section 26 of the Interpretation Act.
Position: Yes
Reasons: Subsection 162(1) refers to the filing deadline specified by paragraph 150(1)(a), and since the time limit in paragraph 150(1)(a) will be extended by the application of section 26 of the Interpretation Act, the date for the calculation of the late-filing penalty under subsection 162(1) will also be extended.
June 12, 2002
HEADQUARTERS HEADQUARTERS
Assessment and Collections Branch Income Tax Rulings Directorate
Business Returns and Payments T. Lanzer
Processing Directorate (613) 957-2129
Attention: Wendy Baldwin 2002-012735
Calculation of a Corporate Late-Filing Penalty
We are responding to your memorandum mistakenly dated May 7, 2001 that was received by us on April 4, 2002, requesting our comments on the calculation of a corporate late-filing penalty.
As noted in your memorandum, paragraph 150(1)(a) of the Income Tax Act (the "ITA") provides the time limit for filing a corporate income tax return. Pursuant to this paragraph, a corporation must file within 6 months of the end of its tax year. Should the return not be filed within this period, the corporation is subject to a late-filing penalty calculated in accordance with subsection 162(1) of the ITA. The amount of the late-filing penalty is calculated based on the amount of tax that was unpaid when the return was required to be filed.
Given the above, a corporation may choose not to file a return within the 6-month timeframe, but nevertheless remit the full amount of its tax payable sometime during this 6-month period. In these instances, there would be no late-filing penalty charge once the return is finally filed and assessed since the balance would have been paid in full prior to the deadline.
From time to time, the 6-month deadline for filing a corporate tax return may fall on a weekend or holiday. In such circumstances, the deadline is subject to section 26 of the Interpretation Act (the "IA") which states:
"Where the time limited for the doing of a thing expires or falls on a holiday, the thing may be done on the day next following that is not a holiday."
Therefore, if the due date for the return falls on a weekend or statutory holiday, the T2 processing system will consider the return to have been filed on time if it is either received or post marked on the following business day. Section 26 of the IA would similarly extend the due dates set out in subsection 157(1) of the ITA for a corporation to remit an instalment payment or to pay any balance of tax owing.
In your situation, a corporation's due date for filing its income tax return falls on a Sunday, and so the return would be considered to have been filed on time if it had been received on the following day, i.e., Monday. While the total tax payable for that year was received on that particular Monday, the return was not received for some months thereafter.
According to your interpretation of section 26, if the return is not received by Monday, the filing-due date reverts back to Sunday. You believe that this is the intention of the legislation, since otherwise the corporation would not be charged a penalty even though neither the payment of tax nor the filing of the return were done by the required statutory dates.
It is our view that there is no late-filing penalty payable in your situation. In our opinion, the phrase "when the return was required to be filed" found in both paragraphs 162(1)(a) and (b) refers to the filing deadline specified by paragraph 150(1)(a), as modified by the IA.
Since the deadline for filing the return determined by paragraph 150(1)(a) falls on a Sunday, it is extended to Monday by section 26 of the IA. Therefore, for the purposes of subsection 162(1), the date "when the return was required to be filed" is Monday. Since, in your case, the taxes are paid in full on Monday, there is no tax unpaid when the return was required to be filed and consequently no late-filing penalty under subsection 162(1) of the ITA.
If the return is not filed on Monday and taxes are not paid in full on Monday, the penalty provisions of subsection 162(1) would likewise apply as of Monday.
Yours truly,
for Director
Reorganizations and Resources Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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