News of Note
CRA accepts that “in contemplation of” can be backwards looking
Email this ContentAfter quoting from Copthorne as to the meaning of the extension in s. 248(10) of the concept of a series of transactions, CRA stated (in the context of a question on s. 55(2)):
Therefore … “in contemplation” is not read in the sense of actual knowledge, but in the broader sense of “because of” or “in relation to” the series. Therefore, this can be applied to events either before, or after a specific transaction.
Therefore, the sole factor of transactions occurring at the same time is not necessarily a deciding factor either way. The transactions are reviewed in the context of the transaction identified and used to apply to the specific section of the act, in this case subsection 55(2).
Neal Armstrong. Summary of May 2019 CPA Alberta CRA Roundtable, ITA Session – Q.7 under ITA s. 248(10).
5 more translated CRA interpretations are available
We have published a further 5 translations of CRA interpretations released in February and January, 2011. Their descriptors and links appear below.
These are additions to our set of 1121 full-text translations of French-language Roundtable items and Technical Interpretations of the Income Tax Rulings Directorate, which covers all of the last 9 years of releases of Interpretations by the Directorate. These translations are subject to the usual (3 working weeks per month) paywall.
CRA indicates that a supply is deemed for GST/HST purposes to be received by a recipient at the time the related agreement is entered into
ETA s. 133 deems property or services supplied pursuant to an agreement to be supplied at the time the agreement is entered into. It does not explicitly deem there also to be an acquisition by the recipient at that time, but this appears to be inferred by CRA.
Where a builder was invoiced, after the time that it self-assessed for the fair market value of a newly-constructed multiple unit residential complex (at the time of substantial completion and first tenant occupancy) for work done before that time, CRA explained the availability of an input tax credit therefor on the basis that, by virtue of s. 133:
where a builder of a MURC agrees to acquire property or a service for consumption or use in constructing the MURC, the supply of the property or service is generally considered to be made to the builder at the time that the agreement is entered into (that is, the builder is considered to be the recipient of the supply at that time).
Neal Armstrong. Summaries of May 2019 CPA Alberta CRA Roundtable, GST Session – Q.8 under ETA s. 133 and s. 169(1).
CRA indicates that a gross negligence penalty generally should not apply to a genuine misinterpretation of the ETA
Respecting whether the ETA gross negligence applied where there has been a failure to report taxable revenue, CRA indicated that “Usually, gross negligence penalties are not assessed where it is considered that there was a genuine misinterpretation of the ETA on the part of the registrant and it is reasonable to assume that the registrant did not know whether a particular supply was a taxable supply” and that “Generally speaking, no penalty will be assessed where it appears that the registrant was confused about the reporting of an amount and it is the first time a penalty is being considered.”
Neal Armstrong. Summary of May 2019 CPA Alberta CRA Roundtable, GST Session – Q.7 under ETA s. 285.
The HBC privatization entailed a significant deemed dividend
Under a Plan of Arrangement, a grouping of non-resident shareholders holding over 60% of the HBC common shares transferred their shares to a newly-formed LLC pursuant to “rollover agreements” (presumably so termed because their HBC shares were not viewed as taxable Canadian property). HBC then purchased for cancellation the common shares of the minority shareholders for $11.00 per share, giving rise to deemed dividends equaling the excess over the paid-up capital of $7.26 per share. It was suggested that shareholders could consider selling into the market to avoid deemed dividend treatment.
Neal Armstrong. Summary of HBC Circular under Mergers & Acquisitions – Cross-Border Acquisitions – Inbound.
CRA indicates that late filing a financial institution return is not particularly relevant to the imposition of an ETA s. 284.1 penalty
When asked about the application of the ETA s. 284.1 penalty to an unfiled return for a financial institution (on form GST111 or RC7219), and whether a zero dollar line item triggers a minimum penalty amount of $1,000, CRA stated:
Where an information return that was not filed on time is subsequently filed, and the correct amount reported on the particular line is zero … there would be no penalty under subsection 284.1(1) based on the formula for calculation the penalty in that subsection. …
However, CRA went on to indicate (respecting the penalty under s. 284.1(2)) that:
Where a return has not been filed, the CRA may apply the $1,000 penalty for a particular line in the absence of information that would support a lower penalty amount.
Neal Armstrong. Summaries of May 2019 CPA Alberta CRA Roundtable, GST Session – Q.6 under ETA s. 284.1(2) and s. 284.1(3).
CRA will deny a request for a late-filed ETA s. 156 election where not all returns have been filed
Respecting a query on late-filed ETA s. 156 elections, CRA stated:
Under administrative tolerance, the CRA may consider a request to accept a late-filed election. These requests will be considered on a case-by-case basis. As a condition, Paragraph 4 of policy statement P-255 specifies that all GST/HST returns must be filed by all parties to the election, and, that the parties must be fully compliant with the GST/HST legislation. Where GST/HST returns are outstanding, or a registrant is non-compliant, the request to accept this election will be denied.
Neal Armstrong. Summary of May 2019 CPA Alberta CRA Roundtable, GST Session – Q.4 under ETA s. 156(4)(b)(ii).
CRA may accept a late-filed ETA s. 211 election
The Alberta CPAs have published the May 2019 CPA Alberta CRA Roundtable. Although there was also an income tax session the GST session is more useful, as CRA declined to answer any specific technical questions in the income tax session since the Alberta CPAs were not one of the “national organizations with a national or international focus” (like the APFF?)
Respecting the ETA s. 211 election (to make otherwise exempted supplies by a public service body, such as a charity, taxable), CRA stated:
[I]f a charity has been charging the GST/HST on supplies of real property that would otherwise be exempt and has been accounting for that tax and claiming any ITCs it may be eligible to claim in its net tax calculations and remittances as if the election had been filed in accordance with subsection 211(5), the CRA may accept a late filed-election, effective as of the date the charity began charging the tax, if the charity was eligible to file the election on that date.
There was more strident language about such a late election only being accommodated in “exceptional circumstances” three months earlier at the 28 February 2019 CBA Roundtable, Q.1.
Neal Armstrong. Summary of May 2019 CPA Alberta CRA Roundtable, GST Session – Q.3 under ETA s. 211(5)(c).
Here are our full-text translations of the 2019 APFF Roundtable
Today, CRA published in final form its responses to the questions posed at the October 2019 (regular) APFF Roundtable. Although these responses have already been summarized by us, for your convenience the following table lists and links these questions and responses and our summaries of the responses, and provides brief descriptors.
In October, we provided translations of the full text of the answers, and provided brief summaries of the questions posed. Now you have full-text translations of the questions as well. We have not noticed any changes in the final answers. (There was a clarification to the wording the question posed in Q.9(b).)
However, at the Roundtable, CRA did not answer Questions 4, 7 and 14, which we have not included below as they are still pending.
Income Tax Severed Letters 4 March 2019
This morning's release of 16 severed letters from the Income Tax Rulings Directorate is now available for your viewing.