Section 296

Subsection 296(1) - Assessments

Cases

Sood v. Canada (National Revenue), 2015 FC 857

settlement agreement not according with law required to be revoked

The applicant objected to the denial of his claim to the Ontario new housing rebate, and he then accepted a CRA offer to refund the difference between his claim and amounts previously credited to him. When CRA tried to implement this settlement agreement, it discovered that the applicant was not entitled to any further rebate as he had purchased the house before the relevant entitlement date (June 18, 2009). The applicant filed an application under the Federal Court Act for enforcement of the settlement agreement.

After finding that he lacked the jurisdiction to consider the application (as it represented a "collateral attack on the validity of the tax reassessment"), Gascon J referred to the Galway and Cohen line of cases, and stated (at para. 54) that "the Agency was required to revoke the settlement agreement since no legal or factual basis supports Mr. Sood's claim to the provincial new housing rebate".

See summary under Federal Court Act, s. 18.5.

Locations of other summaries Wordcount
Tax Topics - Other Legislation/Constitution - Federal - Federal Court Act - Section 18.5 requested enforcement of settlement agreement was collateral attack on assessment 148
Tax Topics - Income Tax Act - Section 152 - Subsection 152(1) settlement agreement not according with law required to be revoked 155

See Also

Delia v. Agence du revenu du Québec, 2018 QCCQ 9487

QBCA did not provide that audit or other proceedings could be commenced against a dissolved corporation

The ARQ commenced a QST audit of a corporation (Motostar) after its voluntary dissolution by its sole individual shareholder (Delia) and assessed Motostar for some unremitted QST – and then assessed Delia for the same amount under the Quebec equivalent of ETA s. 323(1) (and ITA s. 227.1(1).) Cameron JCQ found that the assessment of Motostar was void given that the equivalent provision in the Quebec BCA to CBCA s. 226(2) did not (unlike s. 226(2)) provide that a proceeding may be brought against the dissolved corporation within X years after its dissolution, and instead merely provided that “judicial or administrative proceedings to which the corporation was a party” are continued against its shareholder on the dissolution. (As noted, the “administrative proceedings,” i.e., audit, were commenced after the dissolution)

Locations of other summaries Wordcount
Tax Topics - Other Legislation/Constitution - Federal - Canada Business Corporations Act - Section 226 - Subsection 226(2) assessment against dissolved corporation was void because audit commenced after its dissolution 315
Tax Topics - Excise Tax Act - Section 323 - Subsection 323(3) there was no lack of diligence of the director in considering that the accounts accurately reflected no QST payable 367
Tax Topics - Income Tax Act - Section 227.1 - Subsection 227.1(3) director exercised due diligence in relying on the accuracy of company accounts 232
Tax Topics - Excise Tax Act - Section 323 - Subsection 323(1) assessment could be made of director for unremitted QST even though assessment therfor of dissolved corporation was void 340
Tax Topics - Income Tax Act - Section 152 - Subsection 152(1) dissolved corporation could not be assessed for QST assessed pursuant to an audit that commenced after its dissolution 205

Administrative Policy

25 February 2016 CBA Roundtable, Q.8

CRA “flexibility” to assess a prior return to allow an unclaimed s. 232 rebate credit

When a credit note is issued under s. 232, a deduction against net tax can be taken only for the reporting period in which the credit note was issued (s. 232(3)(b)). If the registrant neglects to claim the deduction, will CRA reassess on a request to allow a late claim? CRA responded:

Our position as stated in...P-149R...has not changed.

…Amounts included on previously filed GST/HST returns may be adjusted, except where a person is attempting to increase the amount of input tax credits (ITCs) or other credit adjustments without a corresponding increase in tax liability for the same reporting period.

In certain circumstances, administrative flexibility may be exercised to make adjustments for missed ITCs or deductions without a corresponding increase in tax liability for the same reporting period. This flexibility may include where the adjustment relates to an amount that may not be reported or accounted for in a subsequent period. The circumstances surrounding a registrant's request will be taken into account when deciding whether to adjust a previously filed return. For example, an audit of the registrant's records may be required.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 232 - Subsection 232(3) subsequent assessment of return to allow unclaimed credit 111

Excise and GST/HST News - No. 95

45 day standard

8 April 2015: CRA has changed its services standard, from responding to GST/HST ruling or interpretation requests (that are not highly technical or precedent–setting) within 45 days of receipt, to within 45 days of receiving of all relevant facts and supporting documentation.

CBAO National Commodity Tax, Customs and Trade Section – 2014 GST/HST Questions for Revenue Canada, Q. 8

time stamping of items received
available with membership password at http://www.cba.org/CBA/sections_NSCTS/main/GST_HST.aspx

TSD staff will no longer receive correspondence directly from the public. Drop boxes are available for taxpayer use at CRA locations and they are emptied of their contents twice daily. The contents are stamped by CRA mail operations the same day they are received. For the first clearance each morning, items are date stamped with the previous day's date. Also, if a taxpayer wishes to have proof of filing or payment, they can file or pay electronically to be provided with a confirmation number and the option to print a copy.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 169 time stamping of items received 91

May 2013 ICAA Roundtable, GST Q. 7 (reported in April 2014 Member Advisory)

no return amendment to claim additional ITCs

//www.cra-arc.gc.ca/E/pub/gl/p-149r/README.html">: P-149R states that returns cannot be amended to claim additional ITCs. Is this still the case? CRA responded:

CRA's policy with respect to the amendment of GST/HST returns has not changed and remains in line with…P-149R… .

P-149R Administrative policy regarding adjustment to the goods and services tax/harmonized sales tax return November 1999

Adjustment for prior return provided no increased ITCs

Amounts included on previously filed GST/HST returns may be adjusted, except where a person is attempting to increase the amount of input tax credits (ITCs) or other credit adjustments without a corresponding increase in tax liability for the same reporting period.

Discretion to allow ITCs

In certain circumstances, administrative flexibility may be exercised to make adjustments for missed ITCs without a corresponding increase in tax liability for the same reporting period. For example, where a registrant is an annual filer who would be required to wait over 12 months to claim a missed ITC, the Department may consider the registrant's request to amend the previously filed GST/HST return.

Paragraph 296(1)(a)

Administrative Policy

May 2016 Alberta CPA Roundtable, GST Q.9

HQ referral of $5M assessments

In the course of a more general response re increasing efficiency of the objection process, CRA stated:

[A] mandatory referral process is in place in which proposed GST/HST assessments exceeding $5 million must be referred to HQ prior to the issuance of the proposal letter to the registrant. These files are reviewed by the impacted HQ program area to ensure the correct technical application of the Excise Tax Act (ETA) and CRA’s administrative policies.

26 February 2015 CBA Roundtable, Q. 23

may assess net tax prior to effective date of registration
(full text available with membership password at http://www.cba.org/Sections/Commodity-Tax,-Customs-and-Trade/Resources)

New ss. 241(1.3) to (1.5) contemplate that CRA can register a person whom it suspects of being required to be registered for GST purposes after giving 60 days’ notice, but with the effective date of the registration to be no earlier than 60 days after giving such notice. CRA considered that these provisions do not interfere with its current practice of simply assigning a GST/HST registration number to someone who should have been registered, and then assessing the person under that number for unremitted net tax – and noted that

CRA could still assess that person under paragraph 296(1)(a) of the ETA for unremitted net tax in respect of reporting periods prior to that person’s effective registration date. [emphasis added]

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 241 - Subsection 241(1.5) not precluded from reassessing pre-registration periods 123

Paragraph 296(1)(b)

See Also

Royal Bank of Canada v. The Queen, [2007] GSTC 122, 2007 TCC 281

no double taxation in s. 296(1)(b) assessment of purchaser because supplier had been released from its remittance obligation under CCAA plan

CRA assessed Canadian Air Lines ("CAIL") in June 2000 for failure to charge GST on frequent flier points which the appellant ("RBC") paid for. CAIL did not pay the assessment and in January 2001, CRA assessed RBC for GST that was payable by it on the same points purchases. In rejecting submissions on behalf of RBC that the second assessment gave rise to double taxation, Hershfield J stated (at paras. 68, 69 and 73):

[I]t is untenable to think that recipients would be liable to pay two collectors for GST on the same transactions. To prevent this…[s]ubsection 278(2) provides that amounts collectable by the Crown from a recipient cannot be paid to the Crown if the supplier is liable to collect the tax from the recipient.

…It is not enough then that an assessment has been issued against the Appellant. As long as CAIL as supplier has an obligation under section 221 to collect tax from the Appellant as agent of Her Majesty…the Crown cannot collect the tax payable by the Appellant as recipient of a supply except on behalf of CAIL.

… CAIL filed the Plan under the CCAA which released it of its liabilities arising before March 24, 2000. As the Plan was accepted by CAIL's creditors…it may necessarily follow that CAIL's collection obligation under section 221 was terminated so as to lift the limitation in subsection 278(2). But in the absence of provisions in the Act spelling out when such limitation is lifted, such finding is best left for another day – perhaps in a collection forum.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Financial Service - Paragraph (l) taxable supply of frequent flyer points 140
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Supply taxable supply of frequent flyer points 197
Tax Topics - Excise Tax Act - Section 181 - Subsection 181(1) - Coupon frequent flyer points could be coupons 110
Tax Topics - Excise Tax Act - Section 181.2 frequent flyer points not gift certificates 119
Tax Topics - Excise Tax Act - Section 278 - Subsection 278(1) s. 278(2) precluded direct collection on assessment of recipient until supplier released from remittance obligation 257

Carlson & Associates Advertising Ltd. v. The Queen, [1997] GSTC 32 (TCC), briefly aff'd [1998] GSTC 25 (FCA)

only potential for double taxation

The appellant ("Carlson Advertising"), on running into financial difficulties, did not pay GST to suppliers. When it was assessed pursuant to paragraph 296(1)(b) for tax payable, it appealed on the ground that it was already liable to pay outstanding accounts including GST to its suppliers.

In dismissing the appeal, Hamlyn J. noted that in addition to the supplier having a defence to a collection action, the question of double taxation was premature as there was only a potential for double taxation (the supplier had not been assessed).

Administrative Policy

May 2017 CPA Alberta Roundtable, GST/HST Q.2

recipient is not usually assessed under s. 296(1)(b)

CRA is starting to use s. 296(1)(b) to assess the recipient outside of an insolvency context. How does a recipient of taxable supplies resolving liabilities under s. 165? CRA responded:

While paragraph 296(1)(b) of the Act does provide the Minister with the discretionary authority to assess a recipient for tax payable on a taxable supply (other than a zero-rated supply) made in Canada, the CRA will not generally intervene to assess the recipient for tax imposed under section 165 of the Act, but may assess a recipient for tax payable in circumstances of potential revenue loss. The usual practice of the CRA with respect to the tax payable under section 165 of the Act, is to look to the supplier to fulfill its obligations to charge, collect and remit tax on taxable supplies made in Canada.

P-112R "Assessment of Tax Payable where a Purchaser is Insolvent" 9 March 2000

assessment of insolvent purchaser

The CCRA will not generally intervene to assess the tax payable by the purchaser under section 165. However, in circumstances of potential revenue loss, the Minister may exercise its authority under paragraph 296(1)(b) of the ETA and assess a purchaser who is insolvent or bankrupt in respect of the GST/HST not paid to a supplier.

For example, an assessment of tax payable may be made where a purchaser has claimed an input tax credit (ITC) in respect of a taxable purchase, for which payment to the supplier remains outstanding, and the supplier is entitled to a bad debt deduction in calculating its net tax. Under these circumstances, an assessment of tax payable addresses the net revenue loss position that would occur if the supplier deducts the bad debt adjustment in its net tax calculation.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 169 - Subsection 169(1) assessment of insolvent purchaser for tax but no ITC denial 49

Subsection 296(2) - Allowance of Unclaimed Credit

See Also

GF Partnership v. The Queen, 2013 TCC 53, aff'd 2013 FCA 260

A housing developer ("Mattamy") recouped the cost to it of (GST-exempt) development levies paid by it to the relevant municipality in its sales agreement with home purchasers. These amounts were found to be part of the taxable consideration for such home sales, with the result that Mattamy was found to have been understating the sales price to the purchasers. As the new housing rebates ("NHRs") of the purchasers (which they had assigned to Mattamy and which it had rebated to them as contemplated in s. 234(1)) increased as the sales price increased to $350,000, this increased taxable consideration increased the NHRs which could have been claimed on some of the sales.

Woods J found that Mattamy was not entitled to a credit under s. 296(2) for such unclaimed NHRs as Mattamy had not satisfied the requirement in ss. 296(2)(a) and 234(1) that it had credited an amount to the home purchasers under s. 254(4) in respect of such unclaimed NHRs.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 153 - Subsection 153(1) recoupment of development charges included in consideration 205
Tax Topics - Excise Tax Act - Section 154 - Subsection 154(1) 126
Tax Topics - Excise Tax Act - Section 254 - Subsection 254(6) developer ought to have known that development levies not incurred by it as agent 286

Pawlak v. The Queen, 2012 TCC 355 (Informal Procedure)

The registrants had unclaimed input tax credits (well in excess of their taxable supplies) for 2003 and 2004, for which they did not file GST returns until September 2009 (i.e., beyond the limitation period in s. 225(4) for ITC claims). The Minister denied all of the ITCs claimed in excess of the taxable supplies made by them, relying on such limitations period.

Webb J. found that the registrants' claim for ITCs should be allowed pursuant to s. 296(2). Literally, 296(2)(b) provided that the Minister is only compelled to take into account a taxpayer's ITCs that the taxpayer has not claimed on any return prior to the Minister's reassessment. However, this led to the illogical result that a registrant is better off not claiming ITCs on a late return itself , and instead referring to them in a separate letter delivered to the Minister (para. 15) - or appealing the Minister's denial of the ITC claims and then requiring the Minster to take the ITCs into account when issuing a reassessment to implement a favourable Tax Court judgment (para. 17).

Locations of other summaries Wordcount
Tax Topics - General Concepts - Onus 91

Administrative Policy

22 June 2017 Interpretation 180966

discretion to assess a previously filed rebate application to increase rebate

Is there a section permitting CRA to allow missed rebate amounts? CRA responded:

Under subsection 297(2), the Minister may reassess or make an additional assessment of the amount of a rebate, notwithstanding any previous assessment of the amount of the rebate. Thus…CRA…has the discretion to reassess a previously filed rebate application to make an adjustment to the claim to allow a missed rebate amount providing the time limit for doing so has not expired and the person has met all the eligibility requirements for claiming the rebate.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 262 - Subsection 262(2) where a rebate claimant has underclaimed, it can request an assessment of the claim 491
Tax Topics - Excise Tax Act - Section 296 - Subsection 296(2.1) required inclusion in assessment can include a rebate claim that was underclaimed 162
Tax Topics - Excise Tax Act - Section 297 - Subsection 297(4) interest on missed rebate claim 102
Tax Topics - Excise Tax Act - Section 261.4 - Subsection 261.4(1) - Paragraph 261.4(1)(c) second rebate application accepted for different transaction 145

25 February 2016 CBA Roundtable, Q.11

S. 228(4) assessment technically does not trigger s. 296(2) crediting obligation

A GST-registered person purchases commercial real estate and, when it files its return for that month, neglects to report the tax payable under s. 228(4) on the purchase and to claim the offsetting input tax credit. CRA generally will assess the purchaser for its s. 228(4) tax, allow the off-setting ITC and not assess any interest - but it will not provide this “administrative relief” “where the purchaser was previously assessed under similar circumstances.” CRA considers its usual approach to be “administrative relief” because, as a technical matter, “the tax payable [under s. 228(4)] is not part of the registrant’s net tax calculation” – so that in CRA’s view it is in its discretion as to whether, in addition to assessing the purchaser’s s. 228(4) tax, it also assesses the purchaser’s negative net tax resulting from recognizing the unclaimed ITC.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 228 - Subsection 228(4) relief usually provided where registrant fails to self-assess tax on purchase of commercial property 195

May 2015 Alberta CPA Roundtable, GST Q. 12

ITCs identified during an audit generally should be deducted in a return assessed by the auditor

CRA auditors are failing to apply s. 296(2) when credits are identified by the registrant that have not been claimed before the time of the audit, and some auditors are suggesting that the registrant should instead claim the ITCs on a future return. In addition, does Policy 149R (re adjustment of previously-filed returns) override s. 296(2) as suggested an auditor? CRA responded:

Since the auditor or examiner is assessing the return, they must take into account any unclaimed input tax credits (ITCs) or allowable deductions for the particular reporting period in the course of determining the registrant's net tax as per subsection 296(2). … [T]he CRA considers the "particular reporting period" to be the reporting period in which the ITC or deduction first became claimable.

… P149 deals with situations where a registrant makes a request to have CRA adjust a previously filed return and does not apply to returns under audit or examination. The Minister is not required to assess all GST/HST returns as per subsection 296(1) and thus is not required to accept all requests for changes to previously filed GST/HST returns.

Subsection 296(2.1)

See Also

Zdzieblowska v. The Queen, 2019 TCC 40 (Informal Procedure)

CRA is required to grant an unclaimed and available new rental housing rebate when assessing to deny a new home rebate

The appellant purchased a new home and was credited with the Ontario new home rebate by the builder. A year later this rebate was denied by the Minister (on the basis that the home was used by the appellant as a rental property). The appellant did not object to this assessment. Instead, 28 months after the home purchase, she applied for a new rental property rebate, which was denied (in the view of D’Arcy J, correctly) as having been made beyond the two-year limitation in s. 256.2(7)(a)(iii).

After finding that an assessment of an amount owing under s. 264(1) is not made under s. 296 but, rather, under s. 297(2.1), D’Arcy J stated (at paras. 30, 32, 36):

[A]n amount is only payable under subsection 264(1) and assessed under subsection 297(2.1) if an amount has previously been paid to the person in respect of a rebate. …

When making the subsection 297(2.1) assessment for the overpayment of the rebate, the Minister must consider subsection 296(2.1) since she is assessing an amount that became payable by the person under Part IX of the Act. …

Since the Appellant was assessed, pursuant to subsection 297(2.1), an amount payable of $24,000 under section 264, the Minister should have considered subsection 296(2.1) when issuing the assessment in respect of the New Housing Rebate. In particular, the Minister should have reduced the amount being assessed in respect of the New Housing Rebate by the amount of the Rental Property Rebate if the conditions of paragraphs (a), (b) and (c) of subsection 296(2.1) were satisfied at the time of the assessment.

However, as the appellant had failed to file a notice of objection respecting the New Housing Rebate, the Court had no jurisdiction to consider the application of s. 296(2.1) as described above.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 297 - Subsection 297(2.1) assessment under s. 297(1) engaged s. 296(2.1) offset obligation 238

Poirier v. The Queen, 2019 TCC 8

s. 296(2.1)(b) precluded using s. 296(2.1) to overcome the 2-year deadline for claiming the NRRP rebate

An individual (Poirier) applied for the new housing rebate on his purchase of a new condo unit even though he had already agreed to lease it out effective the closing date. When this claim was denied, he then applied (shortly before the notice of assessment denying the new housing rebate) for the new residential rental property (NRRP) rebate even though this application was made past the application deadline (being two years from the month of purchase).

Poirier referred to ETA s. 296(2.1), which generally requires CRA to take unclaimed rebates into account when assessing a taxpayer.

Smith J indicated that the jurisprudence was unclear whether s. 296(2.1) could be applied to require CRA to grant an offsetting credit for the NRRP rebate when it assessed Poirier to deny the new housing rebate – so that he did not foreclose the possibility that s. 296(2.1) could thereby overcome the two-year deadline. He stated (para. 45):

…[T]he jurisprudence on this issue remains unsettled. On the one hand, it is suggested that the off setting provisions in subsection 296(2.1) are not available when a rebate application has been dealt with under subsection 297(1) … . On the other hand, it is suggested that those provisions may be available in certain circumstances … .

However, he found that such a use of s. 296(2.1) was precluded in this instance because of s. 296(2.1)(b), which provided that the rebate cannot be provided as a credit against the assessment if it has already been claimed by the taxpayer.

Furthermore, the appeal of the Notice of Assessment denying the New Housing Rebate was not properly before the Court since the appellant failed to file a notice of objection.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 297 - Subsection 297(1) 12 months to bounce a rebate application was “with all due dispatch” 300
Tax Topics - Excise Tax Act - Section 254 - Subsection 254(2) - Paragraph 254(2)(b) intention to occupy vitiated when agreement to lease the new condo 91
Tax Topics - Excise Tax Act - Section 256.2 - Subsection 256.2(7) - Paragraph 256.2(7)(a) no power to extend 2-year deadline even where new housing rebate mistakenly applied for within 2 years 120
Tax Topics - Statutory Interpretation - Interpretation Act - Section 32 failure to state mention material particulars not cured by s. 32 145
Tax Topics - Excise Tax Act - Section 262 - Subsection 262(1) failure to include prescribed information vitiated purported new rental housing rebate application 248

Ahmad v. The Queen, 2017 TCC 195 (Informal Procedure)

CRA was required to determine, when assessing, whether the taxpayer had an unclaimed GST/HST rebate

On February 20, 2014, CRA denied the GST/HST New Housing Rebate (NHR) application of the appellant (on grounds which Russell J found to be sound) and assessed the appellant tax - but sent a letter at that time advising that he might be eligible to apply for the New Residential Rental Property Rebate (NRRPR). The appellant filed a timely Notice of Objection to the 2014 assessment (which was confirmed on March 8, 2016), but did not apply for the NRRPR until March 8, 2016. His application was denied pursuant to an assessment dated April 27, 2016, as the application was not received within two years of the date tax became payable on the purchase. The appellant appealed to the Tax Court on June 13, 2016, without having filed a Notice of Objection to the April 27, 2016 assessment. Russell J found that the appellant thus could not be treated as having appealed the April 27, 2016 assessment, stating (at para 29):

It is basic that a person cannot proceed to appeal an assessment in this Court absent a notice of objection to that assessment previously having been filed - see subsections 301(1.1) and 303(1)… .

Russell J then turned to address the appellant’s argument (made at para. 34) that s. 296(2.1) allowed “the granting to him of the NRRPR notwithstanding he had subsequently late filed an application for same.” He first found (at para. 37) that the requirement in s. 296(2.1) - that the Minister had assessed “an overdue amount payable under Part IX” - had been satisfied by virtue of “the February 20, 2014 assessment which denied the NHR and as well assessed the amount of GST/HST overdue … .”

He then stated (at para. 38, 42):

I do not think that in assessing on February 20, 2014 the Minister did determine, per subsection 296(2.1), as to whether an allowable rebate - in particular the NRRPR which had not at that time been applied for - would have been payable to the Appellant as a rebate under Part IX if it had been applied for. …

…I do consider that that question [of whether the Appellant would qualify for an NRRPR] is, per subsection 296(2.1), a matter for the Minister to “determine” as part of the assessment of February 20, 2014, which assessment is under appeal herein. … Certainly the Minister had encouraged the Appellant in February 2014 when the NPR application was denied to submit a NRRPR application; signalling that the Minister considered that the Appellant might well qualify for that rebate.

Russell J then (at para 50) referred the appealed February 20, 2014 assessment back to the Minister for reconsideration and reassessment so as to “determine” under s. 296(2.1) whether, for the appellant, the NRRPR was an “allowable rebate” and, as such, payable to the appellant per s. 296(2.1).

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 256.2 - Subsection 256.2(7) - Paragraph 256.2(7)(a) CRA required to determine in assessing HST on house purchase whether an unclaimed rebate was available 184

The Humber College Institute of Technology & Advanced Learning v. The Queen, [2013] GSTC 63, 2013 TCC 146 (Informal Procedure)

rebate not available where application therefor before assessment

A college ("Humber") was entitled to a 67% GST rebate on the purchase of certain properties. Due to late filing, there was a delay between the times the GST was due and when the rebate was claimed. C Miller J found that the interest Humber owed under s. 280(1) should be calculated on 33% of the gross GST owing (i.e. that the 67% rebate should be effective from the date Humber was entitled to it rather than one year later when it applied for it).

After so finding, he went on to find that the rebate amounts could not (in the alternative) been retroactively applied to reduce the amount of GST owing ab initio to 33% on the authority of s. 296(2.1), given the clear wording of s. 296(2.1)(b) prohibiting such a reduction under s. 296(2.1) where the taxpayer had applied for the rebate before the time of assessment.

A OK Payday Loans Inc v. The Queen, 2010 TCC 469 (Informal Procedure)

s. 296(2.1) not available since assessment did not refelct Pt IX tax payable

The appellant sought a rebate of mistakenly remitted GST for services that were exempt from GST. Paris J., found that s. 296(2.1) did not apply as the relevant assessment was not, as required by the s. 296(2.1) preamble, either in respect of net tax owed for a reporting period or for an amount payable under Part IX. Since no tax was owing to begin with, the assessment did not reflect any amount payable under the Act, but instead simply denied the rebate as being out of time.

Before so finding, Paris J stated (at para. 10):

Subsection 296(2.1) requires that the Minister, when assessing net tax for a reporting period or assessing for an amount due under Part IX of the Act, to take into account a rebate to which a person is entitled under Part IX but which has not yet been claimed by the person, and to apply the amount of the rebate against net tax or against the amount owing. Paragraph 296(2.1)(c) provides that the Minister shall apply the amount of the rebate against the net tax or amount owing even if the period for applying for the rebate has expired.

Welch v. The Queen, 2010 TCC 449

Minister required to accord a rebate for GST paid on fictitious services

The appellant, who was a practising lawyer, was found not to have received any services from a related corporation (“Cactus Cowboys”) to which he paid fees plus GST. Cactus Cowboys had remitted such GST. He was assessed for failure to have reported any net tax respecting his Ontario clients in his relevant GST returns.

In finding that the appellant was entitled to a rebate under s. 296(2.1) for the GST on the Cactus Cowboys fees, D’Arcy J stated (at para. 65):

Cactus Cowboys did not make a supply to the Appellant. As a result, all of the tax paid by the Appellant in respect of the Cactus Cowboys Payments was paid in error. The Appellant was entitled to claim, under section 261…a rebate with regard to the tax paid in error. When assessing the net tax of the Appellant, the Minister was required under subsection 296(2.1)… to apply the allowable rebate for the tax paid in error against the net tax of the Appellant.

Administrative Policy

8 March 2018 CBA Commodity Tax Roundtable, Q.12

s. 296(2.1) unavailable if taxpayer makes late s. 191(3) self-assessment and provides rebate documentation before audit

A non-registered corporation did not self-assess under s. 191(3) on completing the construction of a triplex nor did it claim ITCs. In response to Q.9 at the 2015 Roundtable, CRA indicated that, if the corporation sent to CRA, in the same envelope, a return declaring and remitting the GST under s. 191(3), and rebate claims under ss. 257 and 256.2(3) (resulting in a net refund position), s. 296(2.1) would not apply and s. 228(6) would apply, with the result that the tax would not be considered to have been paid until the filing of the return so that a s. 280.1 penalty and s. 280(1) interest would apply.

Would the answer change if, in the same envelope, the corporation made the s. 191(3) filing (the same as before) but, rather than making the rebate claims, instead only provided the invoices and other documentary support showing the availability of such claims and, in its covering letter, indicating that it was not making such rebate claims and instead was requesting CRA to apply s. 296(2.1)?

CRA responded:

In general, if the corporation submits the documents as described above, our response would remain the same as that provided in 2015. It would appear that subsection 228(6) of the ETA would apply in this case.

Provided that the corporation met all the requirements for qualification, it could make a request under the voluntary disclosure program to request relief from the application of penalties and interest.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 228 - Subsection 228(6) s. 228(6) rather than s. 296(2.1) iapplicable if pre-audit filing showing substantive entitlement to rebates 193

22 June 2017 Interpretation 180966

required inclusion in assessment can include a rebate claim that was underclaimed

Does s. 296(2.1) allow for a new matter if a rebate application was already filed in the claim period? CRA had previously noted:

Where the conditions are met under subsection 296(2.1), an allowable unclaimed rebate amount must be applied against an assessment of net tax of a person for a reporting period or an amount that became payable by the person under Part IX of the ETA. If this is missed by the auditor when assessing the person, then CRA can apply the eligible unclaimed rebate amount where an objection has been filed by the person.

CRA responded:

[W]here a PSB has filed a PSB rebate application for a particular claim period but missed claiming an eligible rebate amount for that claim period in that application, then subsection 296(2.1) may apply where all the other conditions are met under that subsection. The auditor would have to determine whether the conditions are met for claiming the rebate including meeting the time limitation(s) under subsection 296(2.1).

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 262 - Subsection 262(2) where a rebate claimant has underclaimed, it can request an assessment of the claim 491
Tax Topics - Excise Tax Act - Section 296 - Subsection 296(2) discretion to assess a previously filed rebate application to increase rebate 88
Tax Topics - Excise Tax Act - Section 297 - Subsection 297(4) interest on missed rebate claim 102
Tax Topics - Excise Tax Act - Section 261.4 - Subsection 261.4(1) - Paragraph 261.4(1)(c) second rebate application accepted for different transaction 145

19 April 2017 Interpretation 183783

a registrant cannot use ETA s. 296(2.1) to avoid having to file a GST/HST rebate claim

A non-registered corporation which had failed to self-assess itself, subsequently sent in a late return accompanied by a note to the effect that that unclaimed GST/HST rebates existed – but without filing any rebate claim. Would CRA apply s. 296(2.1) in such a case? In responding negatively, CRA stated (TaxInterpretations translation):

[I]n order for subsection 296(2.1)(b) of the ETA to apply, the Minister must always be able in making the assessment to determine the fact that the amount of the rebate would be payable if it were claimed in a rebate application filed in accordance with the ETA. A note filed with the return as in the particular case would not permit the Minister to determine this fact.

25 February 2016 CBA Roundtable, Q. 9

using VDP assessment to access rebate claim

The questioner indicated that a person may wish to correct the failure to file a GST60 return in order to have offsetting rebates applied under s. 296(2.1) (for example, landlord rebate) where the rebate is otherwise out of time. CRA stated:

In general, a gross negligence penalty under section 285 of the ETA will not apply if a person has simply failed to file a Form GST60, GST/HST Return for Acquisition of Real Property….

And then stated:

t should be noted that the VDP does not consider rebates. If a disclosure is submitted with rebate applications, these applications will be forwarded to rebates processing and will be subject to the normal review procedures for eligibility.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 285 gross negligence penalty can be imposed even where no return is filed 203
Tax Topics - Income Tax Act - Section 163 - Subsection 163(2) penalty where no return filed 86

May 2016 Alberta CPA Roundtable, GST Q.11

requirement to issue two assessments where unclaimed GST/HST rebates are allowed on a s. 296(2.1) assessment of net tax

What is being done to ensure compliance with s. 296 across Canada, especially re the assessment of rebate amounts identified by ss. 296(2.1) and (3.1)? CRA responded:

When… the auditor or examiner is assessing net tax, pursuant to subsection 296(2) and 296(2.1), they must take into account any unclaimed input tax credits (ITCs), unclaimed allowable deductions or unclaimed allowable GST/HST rebates for the particular reporting period in the course of determining the registrant’s net tax. … [T]he “particular reporting period” [is] the reporting period in which the ITC or deduction first became claimable. …[T]he auditor…may… request further documentation, including in the case of GST/HST rebates, copies of the actual rebate forms. …

HQ has reminded auditors and examiners of the above requirement… .

With respect to credit amounts that are not refundable, provided the credit amounts are valid and allowable pursuant to sections 296 and 298, auditors and examiners are expected to allow the full credit amounts in the applicable reporting period. The GST/HST mainframe system will then handle the application of subsections 296(3), (3.1), (4) and (4.1)…. [B]ecause GST/HST rebates are required to be assessed under section 297, even when the rebate amount is allowed under subsection 296(2.1), the registrant will receive two Notices of Assessments, one for the changes to net tax and one for the GST/HST rebate.

Articles

Robert Demers, "Indirect Tax considerations in M&A Due Diligence", 2015 CTF Annual Conference paper

GST erroneously paid on a volume rebate is not tax paid in error so that a credit therefor on assessment is not available

Automatic application of unclaimed rebate for tax paid in error (p. 20: 19)

If a rebate has not been claimed, the tax authorities must apply the unclaimed rebate against the net tax assessed when preparing an assessment. [fn 73: ...296(2.1) ETA.]

Therefore, the net effect for a recipient who claimed an ITC in respect of tax paid in error should be nil since the ITC that was disallowed should be offset by way of the subsection 296(2.1) reduction for the tax paid in error.

Non-application by CRA of s. 296(2.1) where tax overpayment was not paid in error (p. 20: 19)

In performing their audits, the tax authorities have taken the position that, in some circumstances, tax paid by the recipient does not constitute tax paid in error. An example would be a case where tax is paid in excess of an amount that does not constitute the consideration for a supply, or where the tax is paid over and above a volume discount whereas no tax was collected on the original supply.

There is a problem in these circumstances. If tax authorities disallow the application of subsection 296(2.1), the registrant is required to pay the duties assessed for the last four years in respect of the ITCs that were refused. The registran's only option is to go back to the person to whom the taxes were paid and request a credit for the tax. If this person agrees to refund the taxes, the taxes repaid to the registrant may be recovered. However, this recovery will be limited to taxes paid in the last two years only. [fn 66: Subsection 261(3).]

Unpublished CRA position on tax overpayment not paid in error (20:25)

A recent review of sales invoices allowed my firm to identify the following issues:…

The target added GST and QST on volume discounts paid to its clients by way of credit notes even though the good sold to clients was zero-rated.
Possible consequences: ITCs claimed by target could be disallowed. The tax authorities may not allow taxes added to credit notes to be considered taxes paid in error (to my knowledge, there is an unpublished interpretation regarding this matter in the bank of available tax interpretations). It may be necessary to go back to clients to obtain a refund for taxes paid in error. There may be a problem relating to the client's ability to seek reimbursement of taxes paid in error over a period of two years, comparedwith the tax authorities' ability to assess the target for a period of four years.

Subsection 296(6)

Administrative Policy

23 March 2017 CBA Commodity Taxes Roundtable, Q.17

CRA can assess to reverse self-assessed Div. IV tax if it has assessed the non-resident for uncharged Div. II tax

Where a Canadian financial institution self-assessed itself for Division IV GST on an imported supply from an unregistered non-resident and then CRA assesses the non-resident for failure to have registered and to have collected and remitted GST on that supply, CRA noted that the financial institution generally could apply for a s. 261 rebate within the two-year limitatin period if the return in question had not already been assessed, but then stated:

the financial institution would be able to request to have its return reassessed in order to have the amount that was originally included as Division IV tax removed and refunded to the financial institution subject to the applicable legislative time limit.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 261 - Subsection 261(1) rebate where CRA assesses non-resident for not charging Div. II tax where the recipient had already self-assessed Div. IV tax 314
Tax Topics - Excise Tax Act - Section 218 reversal of s. 218 tax if NR vendor assessed for Div. II tax 81