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.
Dear XXX
Thank you for your letter of August 22, 1989 (your reference XXX) concerning settlement of tax debts. The information supplied was very helpful. In regards to your information request concerning release of tax debt where serious hardship is involved, the following comments apply.
There are no provisions under Canadian Income Tax Law to release taxpayers from debt in cases of serious hardship. However, there are provisions in the Financial Administration Act for remission of taxes and write-off of tax debt under certain circumstances. These two remedies are detailed below.
Remission of Taxes
In accordance with subsection 17(1) of the Financial Administration Act, the Governor in Council on the recommendation of the Treasury Board is empowered to remit any Federal tax, penalty and interest whenever the public interest is best served by doing so. Although there are other situations which could warrant remission, with respect to hardship the guidelines encompass those cases where extreme hardship to the individual and his family exists, or where a community or group of people will suffer. An example of this would be the population of a town with one dominant employer whose business would be wound up irreplaceably by enforcement of payment of tax. A remission request must be recommended by a Minister of the Crown, and although it covers only the Federal portion of the tax debt, the various Provinces have similar legislative provisions and often remit the corresponding Provincial taxes.
If a remission is not granted, the circumstances may warrant write-off consideration (details follow). If the tax debtor's situation is expected to improve in the forseeable future, the account can be placed in "deferred" status, that Is, referred back to the computer for a specified period of time for follow-up. Any financial transactions that occur during this period will result in the account being automatically returned back to active status. At the expiry of the specified time period the account is again reviewed for collectibility, and would likely be written-off at that time if there was no improvement to the financial situation.
Write--Off
Write-off of an account is a process by which the account is deleted from active account inventories. The debt can be reinstated at will and would still be subject to all legal collection remedies. Whereas remission of taxes is a process initiated by the taxpayer or his representative, write-off is a strictly internal procedure and is never communicated to the taxpayer. Deletion of uncollectible accounts is also done in accordance with the Financial Administration Act, and is considered appropriate when there is no reasonable prospect of recovery. With respect to write-off of a debt due to hardship, Treasury Board guidelines stipulate the Minister must be satisfied that the debt or:
- a) is incapable of paying the debt in whole or in part and is not reasonably expected to have the capacity to pay the debt in the forseeable future, and
- b) does not own real or personal mortgageable property, is not purchasing property under the Veteran's Land Act and does not own financial assets that could be applied to discharging the debt in whole or in part, and
- c) the debtor or the debtor's spouse is in receipt of an income tested or needs tested benefit from the Government of Canada, or
- the tax debt or's family income is below the net monthly income level requiring payments from Income towards debt as stated in the Guidelines on Payments From Income issued periodically by the Superintendent of Bankruptcy, Department of Consumer and Corporate Affairs.
In the case of a corporation, an account is very rarely, If ever, written off to alleviate hardship. A corporate debt can only be deleted if the corporation Is without assets, and is no longer operating.
Should you require further information or clarification of the preceding, please contact Ms. Karen Balsdon at (613) 954-1510.
We trust you will find this to your satisfaction.
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 1989
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 1989
Email this Content