News of Note
GST/HST Severed Letters September-October 2024
Email this ContentCRA 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).
CRA accepts a pre-butterfly amalgamation to create business property and a post-butterfly amalgamation to minimize Pt. IV tax
CRA ruled on a gross FMV butterfly to effectively split a Canadian rental real estate operation equally (i.e., 1/3 each) between the three transferee corporations (TCs) for the three holding companies (the Holdcos) for three siblings.
The first step in the proposed transactions was to amalgamate all but one of the corporations in the existing corporate structure, i.e., the parent, its wholly owned subsidiary, and nine of the 10 grandchild subsidiaries, to form DC. Taking into account that one of the grandchild subsidiaries had more than five full-time employees, this had the purpose and effect of converting all the rental properties into business property for purposes of the types-of-property butterfly classification and avoiding DC having a specified investment business. (The TCs apparently acquired the rental properties as investment property.)
The mechanics then involved all three Holdcos transferring their shares of DC to their respective TCs on a s. 85 rollover basis, and then 1/3 of the properties being transferred on a s. 85 rollover basis to each of the respective TCs for Holdco 2 and 3. The transfer of the other 1/3 to TC1 was accomplished by amalgamating it with DC. The stated purposes of this amalgamation was to create a short taxation year for DC, so that it would not generate significant property income that might result in Part IV tax on deemed dividends received by TC2 and 3 as part of the reorganization.
In order to produce an exact 1/3 division of the rental properties, some might be held by the TCs in co-ownership. CRA received various representations that went towards establishing that indeed such properties would be held in co-ownership rather than partnership, e.g., that in various regards, each would and could deal with its co-ownership interest separately.
Neal Armstrong. Summaries of 2021 Ruling 2019-0821121R3 under s. 55(1) – distribution and s. 96.
Supreme Court grants leave in the BNS case
The Supreme Court has agreed to hear the appeal of the Bank of Nova Scotia case.
In 2015, the Bank had requested the carryback of a non-capital loss from its 2008 taxation year to its 2006 taxation year to offset a transfer-pricing adjustment. CRA calculated interest on the increased balance of tax owing for the Bank’s 2006 year (before application of the loss carryback) for the period of approximately eight years ending, pursuant to s. 161(7)(b)(iv), with the date of the Bank’s carryback request, rather than (pursuant to s. 161(7)(b)(ii)) with the return filing date for the loss year. The Bank had unsuccessfully submitted that s. 161(7)(b)(iv) was inapplicable because the reassessment of its 2006 year did not occur “as a consequence of [its carryback] request” as required by s. 161(7)(b)(iv) but “[r]ather, the reassessment was made in order to process the audit adjustment”.
Summary of Bank of Nova Scotia v. Canada, 2024 FCA 192, leave granted 22 May 2025 (41643) under s. 161(7)(b)(iv).