News of Note
CRA is now using s. 231.1 as its primary demand power, and is relegating s. 231.2 to special situations, e.g., information about unnamed persons
Email this ContentCRA is drafting a communique that will clarify that s. 231.1 is the primary information power used by CRA officials to request information, documents, access, and reasonable assistance; whereas the s. 231.2 power will be reserved for obtaining records of financial institutions, information on behalf of treaty partners, and information about unnamed persons.
The communique will clarify that CRA officials should explain in general terms, within the information-gathering correspondence or during meetings, the compliance issue and why the documentation and information sought may be relevant in determining the obligations and entitlements of a taxpayer.
The communique will also apply for purposes of the ETA, which has parallel provisions.
Neal Armstrong. Summary of 28 May 2025 IFA Roundtable, Q.4 under s. 231.1(1).
CRA illustrates an ordering rule for determining whether s. 15(2.17) applies to a cross-border notional cash pooling arrangement – and doubts that the s. 15(2.6) exception applies
CRA indicated that anticipated frequent and ongoing movements under a notional cash-pooling arrangement would likely be considered to form part of a series of loans, repayments, and other transactions for s. 15(2.6) purposes.
CRA then provided the following simple example illustrating the application of the back-to-back rules in ss. 15(2.16) to (2.19) to a notional cash-pooling arrangement involving Canco and two affiliated foreign companies in the pool (Forco1 and Forco2). The 2nd, 3rd and 4th columns show amounts advanced into the pool (if positive) or taken out of the pool (if negative) by Canco, Forco1 and Forco2, respectively, and the 5th column shows the net amount on deposit with the group bank.
|
Canco |
Forco1 |
Forco2 |
Balance |
||
|
1 Oct |
$0 |
$10 |
$(5) |
$5 |
Canco is not in the pool, so that nothing has yet happened. |
|
5 Oct |
$5 |
$10 |
$(5) |
$10 |
Canco deposits $5 into the pool. There is no deemed loan under s. 15(2.17) because, although Forco2 is $5 in overdraft, Forco1 notionally covers that overdraft. |
|
15 Oct |
$5 |
$10 |
$(15) |
$0 |
Forco2 withdraws $10, triggering a deemed loan under s. 15(2.17), because it is reasonable to conclude that the $15 overdraft from Forco2 is made possible by the $5 balance of Canco - i.e., Forco1's positive balance is insufficient to cover Forco2's overdraft. |
|
20 Oct |
$5 |
$15 |
$(15) |
$5 |
This $5 increase for Forco1 does not eliminate the deemed $5 loan of Canco to Forco2: no relevant change. |
|
25 Oct |
$0 |
$15 |
$(15) |
$0 |
Canco's $5 withdrawal results in a deemed repayment of the deemed Oct. 15 loan. However, this likely occurs as part of a series of transactions so that there might not be a refund of the withholding tax under s. 214(3)(a). |
|
26 Oct |
$10 |
$15 |
$(15) |
$10 |
Canco deposits $10. S. 15(2.17) does not apply, similarly to Oct. 5 (Forco1's positive balance notionally covers Forco2's overdraft). |
|
27 Oct |
$10 |
$10 |
$(15) |
$5 |
Forco1 withdraws $5. This triggers a $5 deemed loan from Canco, similar to Oct. 15. |
|
28 Oct |
$5 |
$10 |
$(10) |
$5 |
Forco2 pays off $5 and Canco withdraws $5: this triggers a repayment under s. 15(2.19), similar to Oct. 25. |
Given that the s. 15(2.6) exception is problematic, Canco may wish to make a PLOI election with its non-resident parent pursuant to s. 15(2.11). CRA will be announcing the details of a simplified PLOI election on its website.
Neal Armstrong. Summaries of 28 May 2025 IFA Roundtable, Q.3 under s. 15(2.17), s. 15(2.11) and s. 15(2.6).
GST/HST Severed Letters September-October 2024
CRA is expecting affected taxpayers to start registering for GMTA purposes in the late fall
CRA is expecting to implement a requirement for registration under the Global Minimum Tax Act in late 2025. There will be various options available for registering a GMT program account; for example, a business registration online portal for resident businesses and a non-resident registration web form on Canada.ca for non-resident businesses.
Neal Armstrong. Summary of 28 May 2025 IFA Roundtable, Q.2 under GMTA, s. 60(1).
CRA summarizes DST admin points at the IFA Roundtable
Our summary of the 28 May 2025 IFA Roundtable is now available.
Turning to Q.1, points relating to the CRA administration of the digital services tax included:
- Filing of DST returns will be done through the CRA application programming interface using a JSON schema, with filing taxpayers first required to undergo a certification process.
- There will be only one filing, rather than three, for the calendar years 2022 to 2024.
- Taxpayers wishing to make the simplified Canadian digital services revenues calculations for 2022 and 2023 under s. 12(2) of the DST Act should use the filing schema for 2024, which provides a field for the simplified election, i.e., no separate election form is required.
- There is no need to use a separate form to apply pursuant to s. 60 for a refund of payments made in error on a DST account, and CRA will consider the request for refunds submitted through the Business Enquiries line of My Business Account or by correspondence.
Neal Armstrong. Summary of 28 May 2025 IFA Roundtable, Q.1 under DSTA, s. 45.
CRA finds that a large term note owing by a child’s purchaser corporation to the parents would not by itself give the parents de facto control under s. 84.1(2.31)(c)
A corporation controlled by an adult child acquires all the shares of a subject corporation from the child’s parents, who cease involvement in its day-to-day operations. Although there is some external financing, the parents accept a vendor take-back promissory note for a substantial portion of the purchase price. This note requires regular principal payments over 15 years, does not bear interest absent default and is guaranteed by the child.
Regarding whether the parents’ holding of the note by itself would result in them having de facto control of the purchaser for purposes of the s. 84.1(2.31)(c) rule, CRA first noted that whether there was such de facto control would depend on all the circumstances including, in relation to the note, the relative portion of the financing that it provided, its terms of repayment, any guarantees and the purchaser’s access to alternative financing in the event of a demand for repayment. CRA then stated:
[A] non-interest-bearing promissory note payable over a commercially reasonable period of time would not, in itself, provide the holder with the type of influence that is indicative of de facto control.
It further noted that the personal guarantee would not generally result in de facto control assuming that the purchaser had the capacity to service the note.
Neal Armstrong. Summary of 18 February 2025 External T.I. 2024-1038891E5 under s. 256(5.1).
Income Tax Severed Letters 28 May 2025
This morning's release of three severed letters from the Income Tax Rulings Directorate is now available for your viewing.
CRA indicates that an e-filing deadline date ends based on when midnight occurs in the local Canadian time zone of e-filing
S. 150.1(3) provides that the filing date for an electronically filed return is the day the Minister acknowledges acceptance of it. A return of income was filed electronically at 11:00pm PDT on April 30 from an office in Vancouver, and CRA instantly provided an e-file confirmation acknowledging receipt at 2:00 am EST on May 1.
Which time zone does CRA use when acknowledging receipt of an electronic transmission; and can it accept that all returns filed before 12PM PT are filed on time no matter where they were filed from?
CRA indicated that “[t]he acknowledgment of an electronically filed return is issued in Eastern Time” but that (in the case of an April 30 filing deadline) “a return will be considered filed on time if the CRA receives it on or before April 30 in the respective Canadian time zone.”
Neal Armstrong. Summary of 2023 Alberta CPA Roundtable, Q.10 under s. 150.1(3).
Naugle – Federal Court requires CRA to reconsider cancelling tax under s. 207.06(1) given inconsistencies in the record as to when CRA notified of the TFSA over-contribution
The taxpayer sought cancellation pursuant to s. 207.06(1) of an assessment of taxes regarding her excess contributions to her TFSA for her 2021 and 2022 taxation years. She maintained that she did not find out about the over-contributions until speaking with CRA in the spring of 2023. CRA denied her request on the basis that she had received an assessment of her 2021 taxation year, showing the excess contribution, in July 2022, so that her repayment of the excess contributions, occurring later in 2023, did not represent timely repayment.
In granting the taxpayer's application for judicial review, so that the matter was referred back to CRA for reconsideration, Southcott J noted that this decision was unreasonable because it did not address inconsistencies in the record as to whether a notice was sent to her in July 2022.
Neal Armstrong. Summary of Naugle v. Canada (Attorney General), 2025 FC 926 under s. 207.06(1).
We have translated 7 more CRA interpretations
We have translated a CRA interpretation released last week and a further 6 CRA interpretations released in August of 2000. Their descriptors and links appear below.
These are additions to our set of 3,209 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 24 ½ years of releases of such items by the Directorate. These translations are subject to our paywall (applicable after the 5th of each month).