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.
XXXXXXXXXX
Attention: XXXXXXXXXX
Dear Sirs:
RE: Two Tier Penalty for Failure to Deduct or Withhold
We are replying to your letter of March 19, 1993 concerning the application of the second tier penalty under subsection 227(8) of the Income Tax Act (the Act).
You ask us to confirm that the 20% penalty will not be applied to the second penalty assessed in a particular year where the first penalty was assessed in respect of a failure to deduct in a previous year.
As it read prior to the enactment of Bill C-92, subsection 227(8) of the Act assessed a 20% penalty where, at the time of the failure to withhold or deduct, the person had previously been assessed a penalty under this provision in respect of an amount which should have been deducted or withheld during the same calendar year. Consequently, we agree with your interpretation as it applied prior to the passage of Bill C-92.
Effective for amounts required to be remitted after 1992, paragraph 227(8)(b) of the Act has been amended to apply the second tier penalty only in those situations where the failure to deduct or withhold was made knowingly or in circumstances amounting to gross negligence.
We trust our comments will be of assistance to you.
Yours truly,
P.D. Fuoco for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch
c.c. Source Deductions
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© Her Majesty the Queen in Right of Canada, 1993
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© Sa Majesté la Reine du Chef du Canada, 1993
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