CPA Canada, "Uncertain Tax Treatments (“UTT Proposals”)", 5 April 2022 CPA Canada Submission

Should be restricted to Canadian income taxes (pp. 4-5)

• “Reportable uncertain tax treatment” should be adjusted to clarify that the reporting requirement applies only to Canadian income tax (rather than, say, foreign or non-income tax) issues for which uncertainty is reflected in the “relevant financial statements.”

Whether uncertain tax treatment extends to accounting contingencies (pp. 5-6)

• There should be clarification as to whether a “reportable uncertain tax treatment” only includes an uncertainty reported in a corporation’s relevant financial statements as an uncertain tax treatment under its applicable reporting standards- or whether it also includes any additional reserves recorded in such statements respecting a position on a tax return related to rules in the Act. For example, an uncertain tax issue that is not an income tax issue as narrowly defined in IAS 12 and the corresponding US GAAP rules (e.g., a Part XIII or VI tax issues etc.) potentially would not be reported as an uncertain tax treatment under IAS 12 but, rather, as a contingency under IAS 37.

Whether tax credits that have not been fully booked should be included (p. 6)

• There should be clarification as to whether a corporation must report an uncertain tax treatment respecting a tax credit governed by the Act that comes within IAS 20 and the full amount claimed is not reflected in the relevant financial statements (e.g., because there is not yet reasonable assurance that all the conditions will be satisfied).

Non- impacted corporations in the consolidated group should not report (p.7)

• Confirmation should be provided that reporting is required only for issues reflected in the consolidated financial statements by the specific corporations affected and not by every member of the consolidated group.

Continued reporting of same issue (p. 8)

• Reporting should be required only in years where the computation of the corporation’s taxable income (or loss) is impacted. There should not be continued reporting requirement arising on the same issue, transaction or series of transactions (e.g., multiple penalties should not arise where CRA already was provided with the required information).

Reduced reporting of issues already known to CRA (p. 8)

• Where issues are already known to CRA through filings such as Notices of Objection or pleadings, the s. 237.5 should be satisfied by describing the issue briefly and referencing the previously filed documents.

Failure to deal with off-calendar year taxation years (p. 11)

• Where, for example, a corporation with a March 31, 2022 year end engaged in a transaction in March 2022 that was not determined to create an uncertain tax position until a judicial decision in December 2022, it nonetheless could be required to report this unknown uncertainty when filing its 2022 return by September 2022. Short taxation years should be addressed.