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 a corporation entitled to retroactively change its fiscal period?
Position: Generally, no.
Reasons: There is no provision in the Act for retroactive change of a fiscal period.
September 26, 2003
Joy Bertram HEADQUARTERS
Audit A. Seidel, CMA
Verification and Enforcement Division (613) 957-2058
Windsor Tax Services Office
2003-003432
Change in Corporation's Fiscal Period
This is in response to your e-mail of August 11, 2003 concerning retroactive changes to a corporation's fiscal period.
Background
A corporate taxpayer has established its fiscal period and has filed tax returns corresponding to such fiscal period. The corporation files its tax return for the current taxation year and arbitrarily changes the end of its fiscal period. The corporation did not request a change in its fiscal period as required by subsection 249.1(7) of the Income Tax Act (the "Act").
Issue
Can a corporation ignore the requirements of subsection 249.1(7) of the Act and arbitrarily change the date on which its fiscal period will end?
The "fiscal period" of a corporation is determined by the rules in subsection 249.1(1) of the Act. Once a corporation has chosen a fiscal period, subsection 249.1(3) of the Act applies to deem the subsequent fiscal period of the corporation to start immediately after the end of the previous fiscal period. Subsection 249.1(7) of the Act allows for a change in the fiscal period end of a corporation provided the Minister concurs with the change.
Subsection 249.1(7) prevents taxpayers from rearranging their fiscal periods primarily to minimize taxes. Therefore, as stated in paragraph 23 of Interpretation Bulletin IT-179R - Change of Fiscal Period ("IT-179R") each request for a change to the end of a corporation's fiscal period will be reviewed on its own merits. Furthermore, as stated in paragraph 3 of IT-179R, requests for retroactive changes will normally not be approved by the Minister. As you point out in your e-mail, the Federal Court - Trial Division confirmed, in Azhar Bishay v. The Minister of National Revenue (95 DTC 5619), the Act "clearly requires that any change to a fiscal period be made with the concurrence of the Minister". The Federal Court went on to conclude that "there is no authority for a taxpayer to unilaterally change a fiscal period".
IT-179R discusses the criteria that the Canada Customs and Revenue Agency ("CCRA") will apply when considering a taxpayer's request for a change in the fiscal period of a corporation. As stated in paragraph 2 of IT-179R, requests for changes in fiscal periods will only be approved where it can be demonstrated that the change is prompted solely by sound business reasons and not to obtain tax benefits. The CCRA's interpretation of the expression "sound business reasons" is discussed in paragraph 3 of IT-179R.
We hope our comments are of assistance. If you wish to discuss any of the above further, or if we can be of any further assistance, do not hesitate to contact us at the above number.
For your information a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Canada Customs and Revenue Agency's electronic library. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, they can be provided with the electronic library version, or they may request a copy severed using the Privacy Act criteria which does not remove client identity. Requests for this latter version should be made by you to Mrs. Jackie Page at (819) 994-2898. A copy will be sent to you for delivery to the client.
John Oulton, CA
Manager
Business and Individual Section
Business and Partnerships Division
Income Tax Rulings Directorate
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