Subsection 280(1) - Interest
Cases
Canada v. Villa Ste-Rose Inc., 2021 FCA 35
The respondent, which was not registered for GST purposes, was required to self-assess itself under s. 191(3) for GST on the fair market value of an assisted-living facility constructed on its behalf. It filed the required return in this regard nine months’ late. With that return, it also included rebate claims which were higher than the s. 191(3) tax. CRA accepted the reported GST payable and rebate amounts, but assessed interest and penalties under ss. 280 and 280.1, calculated on the gross GST amount, which it effectively treated as having been owing for the full 9-month period.
Leblanc JA noted:
- (at para. 46, TaxInterpretations translation) that the “text of subsection 280(1) and section 280.1 … does not provide further guidance on whether the unpaid or unpaid ‘amount’ on which interest and penalty may be charged is gross or net [of rebate entitlements]”
- (at para. 50) that the rebate provisions in this case were intended by “Parliament … to remedy a situation that would otherwise be inequitable to non-registrant ‘builders’" who were unable to claim input tax credits for their GST costs (see para. 68),
- (at para. 64) that if the respondent had not reported the transaction and instead been assessed by CRA under s. 191(3), CRA would have been required under s. 296(2.1) to grant the rebate amounts
Leblanc JA then stated (at paras. 66, 69):
To paraphrase … Humber College, it would be incongruous, to say the least, if provisions purporting to assist a taxpayer caused more harm to a well-meaning taxpayer than to a less well-meaning one … . This cannot be the result that Parliament intended in enacting subsection 280(1) and section 280.1 … .
I do not believe that Parliament, in enacting subsection 280(1) and section 280.1 …, had in its mind that the determination of the "amount" to be paid or remitted for the purposes of calculating interest and penalty for late filing of the GST return could, in circumstances such as these …, be made without regard to any rebate otherwise payable to the taxpayer. In other words, such "amount" can only represent, in circumstances such as these, the amount of tax actually owed by the taxpayer. Parliament would have had to express itself differently than it did in order to accept the appellant's argument that it is clear and unequivocal that this "amount" can only represent net tax, without taking into account the rebates otherwise due and payable to the taxpayer.
Accordingly, the reversal of the CRA assessments was confirmed.
Locations of other summaries | Wordcount | |
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Tax Topics - Excise Tax Act - Section 228 - Subsection 228(6) | s. 228(6) would have resulted in set-off of rebate claim against net tax | 254 |
Tax Topics - Excise Tax Act - Section 256.2 - Subsection 256.2(3) | CRA is required to make rebate if conditions satisfied | 216 |
Tax Topics - Statutory Interpretation - Resolving Ambiguity | provision was not clear and unequivocal, so that purpose and policy could be resorted to | 148 |
Tax Topics - Excise Tax Act - Section 296 - Subsection 296(2.1) | set-off under s. 296(2.1) informed an implied set-off in determining “amount” in s. 280(1) | 273 |
Consolidated Canadian Contractors Inc. v. The Queen, [1998] GSTC 91, 1998 CanLII 9092 (FCA)
There was a defence of due diligence (i.e., establishing that the registrant exercised reasonable care) to the imposition of the 6% penalty under s. 280(1). Robertson J.A. stated (at p. 91-13) that there is "a rebuttable presumption that Parliament did not 'intend' to impose absolutely liability", and that in finding here that the presumption against absolute liability had not been rebutted, it was to be observed that s. 280(1) did not use precise and explicit language indicating absolute liability, the penalties under s. 280(1) were often very substantial for small businesses, there were no public health and safety issues involved and the ability of the ability of the Minister to waive penalties was not inconsistent with the presence of the defence.
See Also
Villa Ste-Rose Inc. v. The Queen, 2019 TCC 60, aff'd 2021 FCA 35
A company that was not registered for GST purposes was required to self-assess itself under s. 191(3) for GST on the fair market value of an assisted-living facility constructed on its behalf. It filed the required return in this regard 9 months’ late. With that return it also included rebate claims which were higher than the s. 191(3) tax. CRA accepted the reported GST payable and rebate amounts, but assessed interest and penalties under ss. 280 and 280.1, calculated on the gross GST amount, which it effectively treated as having been owing for the full 9-month period.
D’Auray J found that, under s. 228(6), CRA was required to net the rebate claims against the gross GST payable for interest and penalty purposes.
Locations of other summaries | Wordcount | |
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Tax Topics - Excise Tax Act - Section 228 - Subsection 228(6) | the set-off rule in s. 228(6) generated a net tax amount on which interest and penalties were to be calculated | 359 |
Tax Topics - Excise Tax Act - Section 296 - Subsection 296(2.1) | rebate netting policy of s. 296(2.1) also informed s. 228(6) | 267 |
Filiatrault c. La Reine, 2017 TCC 232 (Informal Procedure)
CRA had assessed the taxpayer for interest under ETA s. 280 for his failure to file returns for what had now been found by Smith J to be a taxable activity of providing psychotherapy services. Smith J found that such interest was not payable because the taxpayer had established a due diligence defence, based on having consulted on the tax status of his supplies with his accountant and with professionals in his health care network. In this regard, he stated (at paras. 54-55):
l’École polytechnique … 2004 FCA 127, confirms that the reasonable diligence defence can be used against an administrative penalty established under the scheme of section 280 of the ETA [stating]:
[D]ue diligence excuses either a reasonable error of fact, or the taking of reasonable precautions to comply with the Act.
I find based on this, that “in order to establish a due diligence defence to a penalty an appellant must show he either (a) made a reasonable error in his or her understanding of the facts, or (b) took reasonable precautions to avoid the event leading to the penalty”: Comtronic Computer Inc. v. The Queen, 2010 TCC 55, paragraph 35.
Locations of other summaries | Wordcount | |
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Tax Topics - Excise Tax Act - Schedules - Schedule V - Part II - Section 1 - Practitioner | Quebec psychotherapist was not a member of the psychologists’ profession | 302 |
Caithkin Inc. v. The Queen, 2014 TCC 80, aff'd 2015 FCA 118
Graham J found that foster care services supplied by the appellant ("Caithkin") were not exempt under Sched. V, Part IV, s. 2. Despite treating such supplies as exempt, Caithkin had claimed input tax credits on the per-diem payments that it made to the foster parents.
Graham J upheld the Minister's penalties under s. 280(1)(a), noting that "in no way could this have-my-cake-and-eat-it-too approach be seen as duly diligent" (para. 39).
Locations of other summaries | Wordcount | |
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Tax Topics - Excise Tax Act - Schedules - Schedule V - Part IV - Section 2 | resupply of foster-care services | 255 |
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Supply | resupply of foster-care services | 69 |
The Humber College Institute of Technology & Advanced Learning v. The Queen, [2013] GSTC 63, 2013 TCC 146 (Informal Procedure)
A college ("Humber") was entitled to claim a rebate under s. 259(3) of 67% of most GST payable by it on its purchases. Approximately a year after it purchased three real estate properties, it realized it had failed to report those purchases. It did so in its August 2008 return, applied at that time for the 67% rebate, and remitted the net amount of GST. The Minister assessed interest on 100% of the GST from the time it was owed, without reduction for the rebate amounts. Humber appealed on the basis that the interest should be calculated on the net 33% amount so that, in effect, it should be given the 67% rebate retroactively to approximately one year before it applied for it.
In agreeing with this approach, C Miller noted (at para. 20) that if Humber had instead only reported the GST on its property purchases in its August 2008 return without claiming the rebate, then the Minister, in assessing that return, would have been obligated to apply s. 296(2.1) so as to grant the rebate on a retroactive basis - and that it was absurd to interpret the Act so as to impose a worse result because Humber made a more complete filing. He stated (at para. 22):
Clearly, subsection 296(2.1) of the Act is there to help a college that has not made the rebate claim, not to harm the college that applies for a rebate it has not yet obtained.
Accordingly, s. 280(1) was to be interpreted on the basis that "the Act intends to offset the rebate against the tax at the time the tax arises" (para. 27).
Locations of other summaries | Wordcount | |
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Tax Topics - Excise Tax Act - Section 296 - Subsection 296(2.1) | rebate not available where application therefor before assessment | 149 |
830480 Alberta Inc. v. The Queen, 2013 DTC 1027 [at 132], 2012 TCC 424
Hogan J. found that the taxpayer, who had failed to file two income tax returns and nine GST returns until they were requested by the Minister, was liable for late-filing penalties. Regarding the taxpayer's submission that it had reasonable grounds to believe that no taxes were owed in connection with the late-filed returns, Hogan J. stated:
To succeed with this defence, the taxpayer must show how the error was made and demonstrate that he relied on the error in deciding to postpone the filing of the returns beyond their due date. This is required in order to satisfy the subjective test. To satisfy the objective test, the taxpayer must then establish that a reasonable person would have made and relied on the same error in deciding to postpone the filing of the returns.
The taxpayer's evidence was vague and self-serving, and did not satisfy either test.
Paquin c. La Reine, 2004 TCC 597
The taxpayer did not report the GST that was payable under the self-assessment rule in s. 191(3) on the completion of two multiple unit residential complexes until one quarter late in the case of one building and two years late in the case of the second building. It also claimed related ITCs in the same returns.
Garon CJ dismissed the taxpayer's submission that the late-claimed ITCs should be applied to retroactively adjust the net amount of GST owing on the buildings, so as to thereby eliminate interest payable under s. 280(1). He stated (at paras. 16-17):
The juxtaposition of the mention of the particular reporting period and the preceding period in paragraph a) of Point B of [s. 225(1)] does not seem to leave any doubt that the legislative intent was to allow a taxpayer to claim input tax credit in a return subsequent to the period during which these credits could first have been claimed. ...
The above indicates that this right to input tax credit does not exist until it is claimed.
Stobbe Construction Ltd. v. The Queen, [1996] GSTC 41 (TCC)
Revenue Canada waived interest, and reduced penalties to 4% in accordance with its policy on "wash transactions", with respect to the failure of the registrant to add GST to its reimbursement charges to tenants for property taxes, utilities and insurance. Lamarre TCJ. found that the registrant had made out a defence of due diligence, with the result that Revenue Canada was directed to delete the 4% penalty.
Locations of other summaries | Wordcount | |
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Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Recipient | 24 |
Administrative Policy
Excise and GST/HST News - No. 114, August 2023
P-194R2 cancelled in light of Villa Ste-Rose
GST/HST Policy Statement P-194R2 Application of Penalties and Interest when a Return and/or Rebate Application, and/or Another Return, is Received After the Due Date was cancelled on May 10, 2023 … . [D]ue to decisions rendered … [in] Villa Ste-Rose … the policy is now obsolete.
Locations of other summaries | Wordcount | |
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Tax Topics - Excise Tax Act - Section 154 | 180 |