CRA indicates that a non-resident who incorrectly claimed a no-PE Treaty exemption is exposed to the usual penalties

CRA indicated that it will not provide any special safe harbour for a non-resident corporation that did not make any T2 filings (other than a Treaty-based claim for exemption in an attached Sched. 91) or prepared contemporaneous documentation under s. 247(4) where it had reasonably (but, in CRA’s view, incorrectly) considered that it did not have a Canadian permanent establishment for its business. Accordingly, its failure to meet statutory deadlines will carry the associated statutory penalties – but CRA will consider, on a case-by-case basis, requests under s. 223(3) and (3.1) for relief of the resulting interest and penalties. CRA did not mention the due diligence defence.

Neal Armstrong. Summary of 16 May 2018 IFA Roundtable, Q.4 under s. 220(3).