25 March 2021 CBA Commodity Taxes Roundtable, Q.1

If, following an objection to a CRA assessment under s. 191(3), that assessment is reduced or vacated, can CRA also consequentially reassess pursuant to s. 298(6) to reduce the new residential rental property (“NRRP”) rebate? In responding affirmatively, CRA stated:

According to paragraph 298(3)(a), the time limit under subsection (2) does not apply in respect of a reassessment of a person made to give effect to a decision on an objection or appeal. Under subsection 298(6), where the result of a reassessment on an objection to, or a decision on an appeal from, an assessment is to reduce the amount of tax payable by a person and, by reason of the reduction, any rebate claimed by the person should be reduced, the Minister may assess or reassess that rebate only for the purpose of taking the reduction of tax into account in respect of the rebate.

CRA confirmed that where an appeal of the builder against a CRA assessment under s. 191(3) (showing an increased FMV of a new multiple unit residential complex at the time of first occupancy) resulted in that assessment being reduced or vacated, CRA has the authority (without regard to the usual time limitation periods) under s. 298(6) to make a consequential reassessment to reduce the builder’s new residential rental property (“NRRP”) rebate (which also is affected by the building’s FMV).

CRA further noted that if the NRRP rebate had also been reassessed (based on the increased FMV) at the same time as the assessment under s. 191(3), the builder was not expected to have objected to both assessments rather than only having objected to the s. 191(3) assessment. It stated that on the reassessment to reduce the s. 191(3) assessment:

[T]he amount of a related NRRP rebate would be similarly reassessed without the need to file a separate objection specifically with respect to the rebate.