15 August 2012 External T.I. 2012-0438481E5 - Change of Fiscal Period Year-End

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249.1(7)

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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.

Principal Issues: Whether changing a fiscal period year-end from February 28 to February 29 in a leap year would be considered a change to a fiscal period requiring the consent of the CRA.

Position: Yes

Reasons: Not one of the specifically identified exemptions.

XXXXXXXXXX
									2012-043848

Andrea Boyle, CGA
August 15, 2012

Dear XXXXXXXXXX:

Re: Change of Fiscal Period Year-End

I am writing in reply to your email of March 1, 2012 in which you asked whether changing a fiscal period year-end from February 28 to February 29 in a leap year would be considered a change to a fiscal period requiring the consent of the CRA.

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. We are, however, prepared to offer the following general comments, which may be of assistance.

The “fiscal period” of a corporation is determined by the rules in subsection 249.1(1) of the Income Tax Act. Once a corporation has chosen a fiscal period, subsection 249.1(3) 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) provides that a corporation may not change the time when a fiscal period ends without prior approval from the Minister. However, requests for a change in fiscal period of a corporation are usually not required where the fiscal period is revised by operation of law. Therefore, generally, a corporation may not change its existing year end without permission unless the change is compelled by law as with an amalgamation or change of control.

Some specific circumstances which have been identified by the CRA as ones in which a corporation is not required to request a change in fiscal period include:

a new corporation is formed as a result of an amalgamation of taxable Canadian corporations described in subsection 87(1) according to paragraph 87(2)(a);
a Canadian corporation is wound-up and you are filing its final return with an abbreviated fiscal period (its legal existence ceases);
control of a corporation is acquired by a person or group of persons pursuant to paragraph 249(4)(d);
an emigrating corporation ceases to be a resident of Canada at a particular time;
a corporation is becoming exempt from tax, or ceasing to be exempt from tax.
an immigrating corporation becomes resident in Canada at a particular time; such corporation may select a new fiscal period after that time, as provided under subparagraph 128.1(1)(a)(ii);
a corporation becomes or ceases to be a Canadian-controlled private corporation in circumstances described in subsection 249(3.1); as a result, such corporation is permitted to select a new fiscal period after that time, as provided under paragraph 249(3.1)(d);
a corporation becomes or ceases to be a financial institution; such corporation may then select a new fiscal period after that time in accordance with subparagraph 142.6(1)(a)(ii); and
the Minister issues a notice of intention to revoke the registration of a corporation as a registered charity; the revoked charity may then select a new fiscal period as provided under paragraph 188(1)(c).

Additionally a corporation with a “floating” year-end does not need to ask concurrence of the Minister under subsection 249.1(7) to be able to schedule a different year end each year – with the restriction that a fiscal period cannot exceed 53 weeks.

As the situation which you have described does not appear to meet any of the CRA’s exceptions, it appears that consent would be required before changing the year-end from February 28th to February 29th. If permission is not obtained to change the fiscal year-end from February 28th to February 29th, then the first day of the subsequent fiscal period would be February 29th.

We trust that these comments will be of assistance.

Yours truly,

Doug Watson
for Director
Business and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

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Summaries

Summary Under

Tax Topics - Income Tax Act - Section 249.1 - Subsection 249.1(1)

use of Feb. 29 in leap year

In 2012-0438481E5, a corporation with a February 28 year end was not entiled to file on the basis of a February 29 year end in a leap year. Is it CRA's practice to require re-filings where a historical February 28 year-end is filed with a February 29 year end in leap year? CRA responded:

We use the history of the taxpayer's filing pattern to determine the taxpayer's intent with respect to their year-end:

If the taxpayer has always filed with a February 28 year-end, even in leap years, and then decides (in a leap year) to file with a February 29 year-end, the IT Rulings Document referenced above would apply as their filing history would indicate that they had originally picked "February 28" as their year-end, and are now trying to change it.

If historically the taxpayer has always filed with a February 28 year-end in non-leap years, and with a February 29 year end on leap years, we acknowledge that the taxpayer intends to have picked the "last day of February", and not the specific date "February 28" as their year-end.

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15 August 2012 External T.I. 2012-0438481E5 - Change of Fiscal Period Year-End

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