CRA finds that the “extension” of an agreement one day after its expiry could result in a new agreement

The phase-out rules for the overseas employment tax credit provide limited relief for a contract "committed to in writing before March 29, 2012." CRA was asked if this relief would apply if an agreement to extend a grandfathered agreement was entered into on January 1, 2013, being one day after the original term of that agreement expired. CRA stated:

Where the extension of a contract is agreed to on a date that occurs after the original contract has already expired…we would generally be of the view that the parties have entered into a new contract rather than merely extending the old contract unless the taxpayer can demonstrate otherwise under the governing private law.

It is not clear what to make of this response given that CRA stooped to engage with the unsophisticated manner in which the question was formulated.  However, whenever an agreement is amended, it would be a good idea for the amending agreement to be dated before the expiry date for the original agreement.

Summary of 30 January 2015 T.I. 2014-0521751E5 under General Concepts – Transitional Provisions.