News of Note
CRA will deny a request for a late-filed ETA s. 156 election where not all returns have been filed
Email this ContentRespecting 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.
Zomaron – Tax Court of Canada finds that a service of inducing merchants to use credit card processing services was an exempt financial service
CRA viewed the taxpayer (Zomaron) as essentially a marketing arm of two “Processors” (e.g., “Elavon”) that accessed the credit card issuer and payment network to pay a merchant whose customer had used a credit card, and then used a portion of the fee (e.g., 2%) paid by the merchant at the end of the month to pay the interchange fees of that network and split the balance of the fee between itself and Zomaron in the agreed proportions. However, it was Zomaron who obtained the agreement of the merchants to use the processing services of Elavon and, although the agreement between Zomaron and Elavon was termed a “marketing” agreement, essentially all the marketing involved was merely that entailed in persuading merchants to agree to use Elavon’s services.
In finding that the net fees received by Zomaron were exempt “arranging for” fees that were not excluded by virtue of being taxable promotional services under para. (r.4) of the financial services definition, Lyons J stated:
[T]he essence for what the Processors is paying Zomaron for is to “arrange for” merchants to use the Processor’s card payment services. This, I find, is the predominant element of the supply provided by Zomaron to [the Processors]. ...
… Even if the supply provided by Zomaron to the Processors involved services of a promotional nature, since these do not represent the predominant element of the supply, paragraph (r.4) has no application … .
Neal Armstrong. Summary of Zomaron Inc. v. The Queen, 2020 TCC 35 under s. 123(1) – financial service – (r.4).
CRA indicates that a s. 6(1)(b)(vii) reasonable allowance could include an apartment allowance re legislative sittings away from the constituency office
Temporary residence allowances are paid to members of a legislative assembly where their permanent residence is more than a specified distance away in order to cover the cost of apartments in that city. CRA implicitly accepted that such allowances potentially could be exempt under s. 6(1)(b)(vii) on the basis that they were travel allowances paid for staying at a location that was at a distance from the “employer’s” ordinary establishment (i.e., the home riding constituency office, keeping in mind that the members, as office holders, were deemed employees). However, CRA added that “[w]hether the allowance is reasonable … would need to be assessed on a case by case basis.”
Neal Armstrong. Summary of 8 November 2019 External T.I. 2019-0820401E5 under s. 6(1)(b)(vii).
Escape Trailer – Federal Court of Appeal finds that the intent of ETA is to only zero-rate goods where they are shipped to a destination outside Canada
When a B.C.-based company (the “applicant”) sold an RV to a U.S. customer, it could have avoided the requirement to charge HST on the sale price by delivering the RV to the customer in the U.S. (so that under ETA s. 142 the place of supply would have been outside Canada) or by shipping the RV to the customer in the U.S. on a common carrier (thereby engaging zero-rating). Instead, it delivered the RV to the customer in a parking lot just north of the border, with the customer then driving the RV across the border as the importer of record. In confirming that CRA had not acted unreasonably in declining to recommend a remission order under s. 23(2) of the Financial Administration Act, Locke JA noted that CRA had “implicitly acknowledged the general intent noted in Montecristo … that GST/HST should be limited to consumption within Canada,” but had reasonably considered that “Goods purchased by non-resident consumers are only intended to be zero-rated if they are shipped to a destination outside Canada, or they are sent by mail or courier to an address outside Canada,” and further stated:
The Assistant Commissioner concluded reasonably that the predicament in which Escape Trailer found itself … was caused not by any unintended results of the legislation, but rather by its failure to comply with any of the detailed conditions for zero-rating.
Neal Armstrong. Summary of Escape Trailer Industries Inc. v. Canada (Attorney General), 2020 FCA 54 under ETA Sched. VI, Pt. V, s. 12.
Clark - Court of Appeal of England and Wales finds that there can be a payment even where there is a resulting trust in favour of the payor
The UK taxpayer argued that a transfer out of his self-invested personal pension plan to another pension plan was not subject to tax for an unauthorized “payment” out of the first plan on the grounds that the second plan was a trust that was void for uncertainty, so that there was a resulting trust of the transferred funds in favour of the first plan, i.e., there was no beneficial transfer. In rejecting this submission, Henderson LJ stated:
[T]he natural reaction of anybody to the question whether there had been a payment of the £2.115 million by Suffolk Life to the LML Pension would surely be that of course there had. The money was intended to pass from the control and supervision of one registered pension scheme to another … . From a practical and common-sense perspective, why should it make any difference to this analysis if it later transpired that, unknown to everybody at the time, the transfer was in fact defective and gave rise to a resulting trust? In the context of the carefully designed scheme of the 2004 Act, one would not expect the meaning of an everyday word like "payment" to depend on legal niceties of that kind.
Neal Armstrong. Summary of Clark v HM Revenue and Customs, [2020] EWCA Civ 204 under General Concepts – Payment and Receipt.
We have 1100 translations of CRA interpretations going back 9 years
We have published a translation of a technical interpretation released last week and a further 5 translations of CRA interpretations released in February, 2011. Their descriptors and links appear below.
These are additions to our set of 1100 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. You are currently in the “open” week for March.
Quebec Ombudsperson criticizes the ARQ for not following the Galway principle in settlement agreements
Quebec’s Public Protector (a.k.a. Ombudsperson) has issued a report containing eight recommendations for improvements in the way that the ARQ handles the process of seeking and entering into settlements with taxpayers.
It found that the internal policy of the ARQ has contemplated settling cases where the facts in the record cannot support its position, or the ARQ fears having its reassessments reversed by the Courts. The report found that it was abusive and improper for the ARQ to reassess without an adequate evidentiary foundation capable of surviving judicial scrutiny – and that, in such instances, the reassessment should be dropped. The Public Protector also found that the ARQ has an obligation to ensure that taxpayers are fully informed of the tax and legal consequences of any settlement, and referenced the CRA’s AD-19-01 Audit Agreement and Waiver of Objection Rights Guidelines in this regard.
After listing the eight Recommendations, the Report gave the ARQ until April 30, 2020 to submit an action plan and timetable in response.
Some will consider that this Report is relevant to how the ARQ has been administering the GST/QST.
Neal Armstrong. Summary of 27 February 2020 Report of the Quebec Ombudsman entitled “So that taxpayers’ rights are upheld in payment arrangement proposals with Revenu Québec” summarized under ETA s. 306.1(2).