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 subsection 220(2.1) of the Income Tax Act (the "Act") provides the Minister with the discretion to waive the three year filing requirement in subsection 129(1), and therefore allow the Minister to issue a dividend refund.
Reasons: The provisions of subsection 220(2.1) may allow the Minister the discretion to waive the requirement to file a prescribed form, receipt or other document, but does not alter or affect whether a corporation has factually filed its return of income within the three years after the end of the year as required by subsection 129(1).
March 11, 2014
T2 Strategy & Coordination Section HEADQUARTERS
Assessment and Benefits Services Branch Income Tax Rulings
Attention: Jeff Lewis Gillian Godson
Application of subsection 220(2.1) to subsection 129(1)
We are writing in reply to your email of July 29, 2013, requesting our views on whether subsection 220(2.1) of the Income Tax Act (the "Act") provides the Minister with the discretion to waive the requirement in subsection 129(1) of the Act that a taxpayer file its return of income within three years of the end of the taxation year in order to allow the Minister to issue a dividend refund.
Subsection 129(1) provides that a private corporation may receive a dividend refund of all or part of the income tax that it paid in respect of certain investment income and capital gains where it has paid taxable dividends to its shareholders, provided it meets the requirements of the subsection. One of the requirements is that the corporation files its return of income within three years of the end of the corporation's taxation year.
Subsection 220(2.1) of the Act provides the Minister with the discretion to waive the requirement to file a prescribed form, receipt or other document, or to provide prescribed information. Similarly, subsection 220(3) specifically provides the Minister with the discretion to extend the time for making a return under the Act. If subsection 220(2.1) were viewed as providing the Minister with the discretion to waive the filing requirement in subsection 129(1), the Minister would be in effect providing an extension of time to file the return.
As previously stated in Rulings Documents 2011-042633 and 2011-040570 an extension of time to make a return using subsection 220(3) does not alter or affect whether a corporation has factually filed its return of income within the period required under the Act. It is our view that regardless of whether the extension of time is provided by subsection 220(3) or 220(2.1), it does not change our conclusion in these documents.
In particular, we note that the court held in Tawa Developments Inc. v The Queen, 2011 TCC 440, that subsection 129(1) contains an unambiguous condition that a tax return be filed within a three-year time limit, and when this condition is not met, the dividend refund cannot be obtained. The provisions of 220(2.1) or 220(3) do not indirectly permit the Minister to issue a dividend refund when subsection 129(1) directly restricts the issuance of the dividend refund. Accordingly, it is our view that granting an extension of time to make a return of income using subsection 220(2) or (3.1) does not have the effect of eliminating the requirement in subsection 129(1) that the return of income be filed within three years of the end of the taxation year.
We trust these comments will be of assistance.
Terry Young, CA, CPA
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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