6 October 1995 APFF Roundtable Q. 1, 9522180 - OPINIONS ISSUED BY REVENUE CANADA

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 Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

APFF-1995

Question 1

Opinions issued by Revenue Canada

During the 1994 APFF congress, it was stated that the Tax Services offices could provide technical interpretations only with respect to routine (normally not complex) situations or transactions that had already been carried out. Only the Rulings Directorate is authorized to issue advance rulings with regard to planned transactions. However, it would appear that under Revenue Canada’s new policy with regard to the real-time auditing of large corporations, the Tax Services offices are regularly consulted by these companies for an opinion on specific issues in connection with planned transactions. If this is so, does Revenue Canada plan to extend this type of consultation policy to all taxpayers?

Answer by the Department of Revenue

The principle of real-time auditing of large corporations involves auditing transactions carried out by a company during a given tax year before the company files its return for that year. For example, a large company whose tax year ends on December 31, carried out a major transaction on June 15,1995. Under an agreement with the Department, the company asks its regional Tax Services office at the end of July 1995, to send an auditor to its offices to audit the June 15, 1995 transaction and the tax implications that the company has determined with regard to that transaction. The Department audits the transaction in September 1995 and confirms to the taxpayer in writing before the end of the corporation’s tax year the tax consequences of the transaction. Another example would be the case where the same company asked the Regional Tax Services office to come and check after the end of its 1995 tax year, but before it filed its income tax return for the year, whether the tax consequences that it has determined with respect to two or three specific issues impacting on the computation of its taxable income for the year are in line with the Department’s policy.

The principle of real-time auditing is limited to this type of service. So, if a company asks a regional Tax Services office for a written technical opinion on a proposed transaction, the regional office will ask the company to direct its enquiry to the Tax Rulings and Interpretations Directorate ("Rulings Directorate") to obtain an advance ruling that is binding on the Department. If the company asks for a written statement of the Department’s general position on a specific issue involving planned transactions, the regional office will limit itself to informing the company of the Department’s general position with regard to the specified issue, to the extent that a position has already been taken, but the regional office will make it known that the written interpretation provided does not constitute an advance ruling. It is therefore out of the question that a regional office would send a team of auditors to a taxpayer’s premises for planned transactions; or examine draft contracts or other documents that are often handled as advance rulings; or issue general national interpretation policies; or even give a written opinion on planned transactions that could constitute or be interpreted as an advance ruling.

Therefore, the position set out by the Department at last year’s congress has not changed over the past year. Only the Rulings Directorate at Revenue Canada headquarters is responsible for issuing written technical interpretations with regard to hypothetical situations involving the setting of general policy by the Department with respect to the interpretation of the Act. Further, only the Rulings Directorate is authorized to issue advance rulings with respect to transactions planned by a particular taxpayer.

Also, the Rulings Directorate does not supply advance rulings with respect to transactions that are already in progress or completed transactions. When it comes to determining whether a completed transaction has been given appropriate tax treatment, the decision rests first and foremost with our regional Tax Services offices.