15 March 2013 Internal T.I. 2013-0476501I7 - Assessment of Ontario Tax

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: Whether an assessment of Ontario tax can be raised after the normal reassessment period in a situation where the Ontario tax was not assessed.

Position: Yes.

Reasons: The Ontario taxes have not been assessed therefore the Ontario tax return is not statue barred.

March 15, 2013

Provincial Affairs Section HEADQUARTERS
Legislative Policy Directorate Income Tax Rulings
Directorate
Attention: Joyce Tong Gillian Godson

2013-047650

XXXXXXXXXX (SIN: XXXXXXXXXX)
Assessment of Ontario Tax

We are writing in reply to your email of January 29, 2013 in which you have requested clarification of whether the provisions of the Income Tax Act (the "Federal Act") provide the Minister with the ability to issue an assessment of Ontario tax beyond the normal reassessment period.

Our comments

In general, subsection 150(1) of the Federal Act requires an individual to file a return of income (T1 return) in prescribed form with the Minister. For all provinces and territories other than Quebec, the T1 return is also the provincial income tax return. More specifically, for an individual who was a resident of the province of Ontario for taxation years ending prior to 2009, subsection 9(1) of the Income Tax Act (Ontario) (the "Provincial Act") provides that a return is required to be filed with the Provincial Minister for each taxation year for which tax is payable under the Provincial Act, in prescribed form and containing prescribed information.

With respect to assessments of Ontario tax, subsection 10(1) of the Provincial Act provides that a number of the provisions of the Federal Act apply for the purposes of Provincial Act. In particular, the provisions of subsections 152(1), (3.1) and (4) of the Federal Act are applicable with respect to an Ontario tax assessment. Subsection 152(1) requires the Minister to examine a taxpayer's return of income for the year and assess the tax. In that regard, the Minister is also required to examine and assess the provincial tax of an individual who is a resident of Ontario. Accordingly, an individual who is a resident of Ontario is required to file a return of income in prescribed form (T1 return), and the Minster will examine the taxpayer's return of income and assess the provincial tax for that year.

Subsection 152(4) of the Federal Act limits the period within which the Minister may make an assessment or reassessment of tax to the normal reassessment period. The normal reassessment period for an individual taxpayer in respect of a taxation year is defined in paragraph 152(3.1)(b) of the Federal Act as the period that ends three years after the earlier of the day of sending of a notice of an original assessment and the day of sending of an original notification that no tax is payable by the taxpayer for the year.

Nevertheless, where a taxpayer who is a resident of Ontario has not been issued an Ontario notice of assessment or a notice that no Ontario tax is payable, the Minister may still make an assessment of the provincial tax as the normal reassessment period has neither begun nor expired for the purposes of the Provincial Act. Accordingly, although a taxation year is beyond the normal reassessment period for federal tax purposes, an assessment of the Ontario taxes may still be issued and is not restricted by 152(4) of the Federal Act.

In addition to the foregoing, it should be noted that where the essential elements of a prescribed form, such as a T1 return, are not provided or are incorrectly stated, the courts have determined that the form may be considered to be invalid, and not filed as required by the Federal Act. In that regard, the failure to report a taxpayer's province of residency in order to determine the applicable provincial tax payable would be considered a substantial failure in the T1 return. As such, there would be a failure to file as required by the Provincial Act.

We trust these comments will be of assistance.

Yours truly,

Terry Young, CA, CPA
for Director
International Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch