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Compliance refund hold legislation Restrictions on refunds and rebates

Starting April 1, 2008, the Canada Revenue Agency (CRA) will apply the compliance refund hold legislation to the following corporate entities that are exempt from paying federal income tax under subsection 149(1) of the Income Tax Act:

• municipalities
• universities
• schools
• hospitals
• non-profit organizations
• federal crown corporations
• Indian band councils

The compliance refund hold legislation, which became effective on April 1, 2007, requires the CRA to withhold the payment of rebates and refunds until all required returns under the Income Tax Act, the Excise Tax Act, the Excise Act, 2001, and the Air Travellers Security Charge Act have been filed.

The CRA implemented an administrative position to ease the administrative burden for numerous corporate entities that are exempt from paying federal income tax under subsection 149(1) of the Income Tax Act and have not filed their required corporation income tax (T2) return in previous years. Corporate entities in the municipality, university, school, hospital, non-profit organization, federal crown corporation, and Indian band sectors will not have their refunds or rebates held for outstanding T2 returns with a fiscal period ending on or before March 31, 2008. This administrative position is for purposes of the automatic refund hold only and does not alleviate their legislative responsibility to file their annual corporate tax return.

However, failure by these entities to file T2 returns by their due dates for the taxation years ending April 1, 2008, and forward will result in a compliance refund hold on their refunds or rebates.

Registered charities, Hutterites, and provincial crown corporations are not required to file a corporation income tax (T2) return and are not subject to the provisions of the compliance refund hold.

For more information about filing a corporation income tax (T2) return, visit www.cra.gc.ca/t2return.

This document is also available for download in PDF format.

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Date modified:

2014-12-03