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 the Minister could assess a corporation at any time for under remitting Part XIII tax for the XXXXXXXXXX to XXXXXXXXXX taxation years.
Reasons: Under subsection 227(10), an assessment of Part XIII tax may be raised at any time. Once raised, Divisions I and J of Part I apply, and the assessment will be treated as though it were issued under section 152. The normal reassessment period, as defined in subsection 152(3.1), would apply once an amount has been assessed under Part XIII.
April 29, 2014
Estrie-Mauricie Tax Services Office HEADQUARTERS
50, Place de la Cité, C.P. 1300 Income Tax Rulings
Sherbrooke, Québec J1H 5L8 Directorate
Attention: Marc Latulippe (613) 960-7919
Under Remittance of Part XIII Tax
We are writing in reply to your inquiry as to whether the Minister is permitted to assess amounts under Part XIII of the Income Tax Act (the "Act") in respect of the XXXXXXXXXX to XXXXXXXXXX taxation years, where those years have never been assessed. We apologize for the delay in providing our response.
You described a situation where, between XXXXXXXXXX and XXXXXXXXXX, a Canadian corporation under-deducted Part XIII withholding tax on interest and dividends that it paid to a non-resident person. The payor incorrectly calculated the withholding based on a tax treaty signed between Canada and a particular country. However, the treaty was not applicable because the recipient of the interest and dividends resided in a different country and Canada does not have a bilateral tax agreement with that country. The corporation reported the amounts withheld and remitted by filing NR4 slips for each year. You have asked whether the Minister could assess the corporation for the amount of Part XIII tax that was not deducted and remitted.
Paragraph 212(1)(b) and subsection 212(2) of the Act require a non-resident person to pay an income tax of 25 per cent on certain amounts, including interest and dividends, unless the withholding rate is reduced by a tax treaty. Pursuant to subsection 215(1), the corporation that makes such payments is required to deduct or withhold the amount of the tax from the payment, and remit that amount forthwith to the Receiver General for Canada on the non-resident's behalf. However, the acceptance by the Minister of this amount and the resulting notification is not an assessment of the Part XIII tax, only an acknowledgement of receipt.
If the payor fails to deduct or withhold that amount, the payor is liable to pay the amount pursuant to subsection 215(6). The payor can then deduct or withhold such amount from any future amount paid or credited to the non-resident person. The authority to assess the Canadian corporation under subsection 215(6) is found in paragraph 227(10)(d), which permits the Minister to assess at any time an amount under Part XIII by a person resident in Canada. Where such a notice of assessment is sent to a person, Divisions I and J of Part I of the Act will apply with any modifications that the circumstances require.
This means that once an amount is assessed under Part XIII, the assessment will be treated as though it were issued under section 152. As such, the normal reassessment period provided in subsection 152(3.1) would apply to that assessment.
In the situation you described, the amount owing under Part XIII by the non-resident has never been assessed; therefore, the normal reassessment period has not started. As such, it is open for the Minister to issue an assessment in respect of the under-deducted amount.
Should you have any questions or require additional information, please do not hesitate to contact us.
Terry Young, CPA, CA
Administrative Law Section
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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