News of Note
CRA indicates that consent given over the phone or by pressing options on a touchtone phone does not constitute “express consent” to electronic information slips
Email this ContentFor some of the information slips, most notably, the T4, T4A and T5, the issuer has the right pursuant to Reg. 209(5) to issue them in electronic format. For the others, it can only do so if (per Reg. 209(3)) it receives the ”express consent” of the recipient taxpayer, which is defined in Reg. 209(4) as consent “given in writing or in an electronic format”.
CRA indicated that consent of the taxpayer given over the phone would not be in writing or in electronic format and that an audio recording of verbal consent provided over the phone would not be so considered, as the recording would not be in an electronically readable form.
Furthermore, consent provided by selecting the electronic receipt of documents using a touch-tone phone would not so qualify, since the "act of selecting an option using a touch-tone phone does not provide clear and explicit consent in writing" and, furthermore, unless the consent provided in this scenario could be retained in an electronically readable format, it would not constitute consent in an electronic format.
Neal Armstrong. Summary of 6 November 2023 External T.I. 2022-0954001E5 under Reg. 209(4).
CRA confirms that there can be double source deductions where a resident Canadian is employed in the US by a US employer
CRA confirmed that where a non-resident employer was paying salary, subject to US source deductions, to a Canadian resident employee performing the employment services in the US, the employer was required to withhold the amounts prescribed under Reg. 102(1). The Reg. 104(2) exemption regarding a non-resident employee was inapplicable.
The employee could annually request, through submitting a form T1213, a Letter of Authority to authorize the non-resident employer to reduce the Canadian source deductions to take into account the employee's foreign tax credit (FTC) for the year. It was recommended that the request include a completed form T2209 (computing the FTC), or a letter providing FTC details.
Neal Armstrong. Summary of 12 December 2023 External T.I. 2023-0967811E5 under Reg. 102(1).
CRA indicates that RRSP beneficiaries of unit trusts are now generally required to get a TIN
CRA concluded that an RRSP trust, which does not have a tax identification number (TIN), and is the beneficiary of a unit trust, is now required to get one.
CRA noted that, by virtue of s. 150(1.2) ITA and Reg. 204.2, the unit trust was required, for taxation years ending after December 30, 2023, to file a Schedule 15 with its T3 returns disclosing, inter alia, each beneficiary and that beneficiary’s “TIN” which, in the case of a trust, was its trust account number (TAN).
Furthermore, s. 237(1.1)(b) provided that a person was required to provide its “designated number” (i.e., per s. 237(1.2)(b), its TAN, if a trust) to another person at that person's request if that person was required to make an information return that required that designated number. Accordingly, the RRSP trust, as a beneficiary of the unit trust, was required to provide its TAN to the unit trust upon the request of the unit trust.
CRA concluded from this that, should the RRSP Trust not have a TAN, it should request one from CRA. In other words, the requirement on the RRSP trust to provide its TAN to the unit trust implied that it was required to get one.
Neal Armstrong. Summary of 19 March 2024 External T.I. 2024-1003321E5 under s. 237(1.1)(b).
Income Tax Severed Letters 23 July 2025
This morning's release of four severed letters from the Income Tax Rulings Directorate is now available for your viewing.
Larocque Family Trust – Court of Quebec finds that s. 160 can apply to a s. 227.1 liability of a director who was not assessed therefor until well after the subject transfer
An individual (Larocque) was a director of a corporation (Construction LMA), engaged in the development of residential projects. Two days after the ARQ had issued a statement of account to Construction LMA showing that it had failed to remit over $527,000 in sales taxes and employee source deductions, Larocque transferred his residence, which was mortgaged to a bank to secure debt owing to the bank by Construction LMA, to a newly formed trust (of which he was the beneficiary and one of the two trustees) in consideration for the assumption of the bank debt.
Two years later, the ARQ assessed Larocque under the Quebec equivalent of s. 227.1 and, a month later, it assessed the trust under the Quebec equivalent of s. 160, based on the extent to which the fair market value of the residence exceeded the amount of the assumed debt.
Tremblay JCQ, noted that, in fact, Larocque had continued to service the bank debt, so that the consideration received by him from the trust for the transfer by him was “purely fictitious” and that the purported assumption of the bank debt was a “sham”. However, the ARQ could not now reverse its assessing position, as “the determination of the value of the consideration must be made at the time of the transfer”. However, he noted that the ARQ might nonetheless consider the payments that continued to be made by Larocque to service the bank debt were further transfers by Larocque to the trust for s. 160 purposes, although this issue was not before him and he was not passing on it.
In rejecting the argument of the trust that it should not be liable under s. 14.4 for the director's liability of Larocque that had not been assessed until two years after the transfer of the residence, Tremblay, JCQ, in following, inter alia, Colitto, stated:
In summary, in a case involving the application of [the s. 227.1 equivalent], it is not the assessment itself that gives rise to the tax debt of a corporate director. Under this provision, when the conditions for applicability are met, the tax debt of the director retroactively arises on the date of the corporation's failure to meet its tax obligations.
Accordingly, the trust assessment was confirmed.
Neal Armstrong. Summary of Larocque (Fiducie familiale Larocque) v. Agence du revenu du Québec, 2025 QCCQ under s. 160(1).
Downtown Hockey – Tax Court of Canada finds that CEWS redeterminations are made on a qualifying period basis even if effected pursuant to a global notice
The taxpayer appealed, under the informal procedure, a single notice of redetermination that reduced CEWS claims for 14 qualifying periods (as defined in s. 125.7) from $92,243.50 to nil. At issue was whether the $25,000 monetary limit under s. 18.12(1) of the Tax Court of Canada Act (the TCC Act) applied.
In finding that, pursuant to s. 152(3.4), redeterminations for qualifying periods were made for individual qualifying periods rather than in the aggregate, and that the phrase "aggregate of all amounts" in s. 2.1 of the TCCA refers to the amount for each individual qualifying period rather than to the cumulative disputed amounts, Sorenson J. stated (at paras. 21-22):
… CEWS entitlement is determined on individual qualifying periods, and even if the results of multiple determinations are set out on one document, the determinations remain separate events.
It is well accepted in income tax appeals that s. 2.1 of the TCC Act applies to each taxation year and assessment thereof, even if multiple years are appealed together in one notice of appeal. … The same rationale applicable to income tax assessments must logically apply to CEWS determinations, namely, individual notices of determination may be appealed in a single notice of appeal without coalescing.
Neal Armstrong. Summary of Downtown Hockey League Ltd. v. The King, 2025 TCC 92 under s. 152(3.4).
We have translated 7 more CRA severed letters
We have translated a CRA interpretations released last week and a further 6 CRA interpretations released in June and May of 2000. Their descriptors and links appear below.
These are additions to our set of 3,262 full-text translations of French-language Technical Interpretation and Roundtable items (plus some ruling letters) of the Income Tax Rulings Directorate, which covers all of the last 25 years of releases of such items by the Directorate. These translations are subject to our paywall (applicable after the 5th of each month).
CRA indicates that a non-resident corporation could be a foreign affiliate for s. 233.4 reporting purposes of only the lowest-tier corporation in a Canadian corporate group
Eight resident individuals together held all the shares of Canco, with percentages ranging from 10.03% to 24%, through their respective Canadian holding companies (in the case of seven of them) and directly (in the case of the eighth.) Canco, in turn, wholly owned a non-resident corporation, Nrco1, which wholly owned Nrco2 and Nrco3. The three Nrcos were foreign affiliates (FAs) and controlled foreign affiliates (CFAs) of each of the individuals, the seven holding companies, and Canco, under the definitions in ss. 95(1) and (4).
Regarding whether those holding corporations and individuals had reporting obligations under s. 233.4(4) in respect of the Nrcos, CRA noted that, under the s. 95(4) equity percentage definition as modified for s. 233.4 purposes by s. 233.4(2)(a), for purposes of s. 233.4, a non-resident corporation could generally only be an FA or CFA of a taxpayer resident in Canada to the extent that the taxpayer directly owned shares in the non-resident corporation, or any other non-resident corporation that directly or indirectly owned shares in the non-resident corporation. As indicated in the Explanatory Notes, a non-resident corporation could be a foreign affiliate of only the lowest-tier corporation in a group of Canadian corporations under common control.
Here, the Nrcos could be FAs only of Canco, and not of the individuals and holding companies, for s. 233.4 purposes, so that the latter had no reporting requirements under s. 233.4(4).
Neal Armstrong. Summary of 30 January 2025 External T.I. 2024-1036931E5 under s. 233.4(2)(a).
GST/HST Severed Letters May 2025
This Friday's release of three severed letters from the Excise and GST/HST Rulings Directorate (identified by them as their May 2025 release) is now available for your viewing.
CRA rules an RCA trust’s refundable Pt. XI.3 tax could be refunded through winding it up and replacing it by a new LC trust
An RCA trust had been set up by Aco to fund pensions to its executives under a SERP. The value of its assets is less than the actuarial value of its liabilities.
The existing RCA trust will sell all its assets and on December 31 will distribute the cash proceeds to Aco (producing an income inclusion under s. 12(1)(n.3).) Consequently, the existing trust will not hold any assets at that year end other than its claim to a refund of the refundable tax, although the SERP will not be terminated.
The following year, a new trust will be settled by Aco, with a view to better securing the benefits payable under the SERP. The only asset of the new trust will be a letter of credit, with Aco contributing the amounts required to pay the LC fees. The payment of the SERP benefits will be made by Aco from its general revenues.
CRA ruled that the existing trust will be able to make the s. 207.5(2) election for the taxation year in which it disposed of all its assets, on the basis that its refundable tax at the end of that taxation year will be nil. In other words, the transactions will generate a complete refund of the existing refundable tax, and the only new refundable tax generated will be based on the quantum of the LC fees.
Neal Armstrong. Summary of 2024 Ruling 2024-1018811R3 F under s. 207.5(2).