Section 150

Subsection 150(1) - Filing returns of income — general rule

Cases

Coffen v. The Queen, 97 DTC 5552 (Ont. Ct. J. (G.D.))

Sheppard J. noted that there was no requirement on an individual taxpayer to file a return if no tax was payable by him for the year in question.

Paragraph 150(1)(a) - Corporations

Administrative Policy

15 May 2019 IFA Roundtable Q. 6, 2019-0798861C6 - Non-resident filing income tax return

"tax is payable" even if already paid

One of the exceptions to the s. 150 requirement for a non-resident to file a Canadian tax return is the exception for an “excluded disposition” in s. 150(5). Where a s. 116 certificate is issued respecting a disposition of taxable Canadian property (that is not treaty-protected property) by a partnership with numerous non-resident partners, and all Canadian taxes owing on the resulting taxable capital gain have been paid, is no Part I tax considered to be payable by the non-residents for the purposes of s. 150(5)(b), such that the disposition will be an “excluded disposition”?

CRA indicated that non-resident taxpayers are required under s. 150 to file a Canadian tax return if inter alia Part 1 “tax is payable” for the year, being the amount payable before deducting any amounts paid on account of tax, such as instalments or withholding. This interpretation applies to “tax is payable” in ss. 150(1), 150(1.1), and (respecting the definition of “excluded disposition”) 150(5)(b). Therefore, even if a s. 116 certificate has been issued indicating that all Part 1 tax has been paid, there would be no excluded disposition.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 150 - Subsection 150(5) - Paragraph 150(1)(b) non-resident partners of a partnership that has disposed of TCP must file Part I returns even if a s. 116 certificate indicates that all Part I tax is paid 149

27 November 2017 External T.I. 2017-0731441E5 - Interchange Canada and Business Number

a non-resident corporation is carrying on business in Canada by virtue of being the legal employer of an employee seconded to Canada

Under the proposed Interchange Agreement with a non-resident corporation (“NRCo”) and a non-resident employee of NRCo, the employee will provide services to the Department for one year while staying at temporary accommodation in Canada, but will remain a non-resident, as well as remaining on the NRCo payroll as an NRCo employee. The Department will reimburse NRCo for the employee’s salary and benefits (with no mark-up thereof).

In finding that NRCo would be required to file a T2 return, CRA stated:

[A] non-resident employer that sends an employee to Canada to exercise employment duties for the employer for one year would generally be rendering services in Canada. As such … NRCo would be carrying on business in Canada.

Under paragraph 150(1)(a) … a non-resident corporation that carries on business in Canada is required to file a T2 … . We are not aware of any exceptions to the requirement to file a T2 where the non-resident corporation has no profit from the business carried on in Canada.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 2 - Subsection 2(3) - Paragraph 2(3)(b) NR corp carrying on business in Canada by virtue of being reimbursed for payroll costs of seconded employee 130
Tax Topics - Income Tax Regulations - Regulation 102 - Subsection 102(1) NR company seconding employee to Canada subject to Reg. 102 withholding requirement but not EI or CPP 164
Tax Topics - Income Tax Regulations - Regulation 105 - Subsection 105(1) salary reimbursement payments made to seconding NR employer subject to withholding 107

6 October 2017 APFF Roundtable Q. 1, 2017-0708971C6 F - Inactive Corporations & subs. 162(7) ITA

requirement for Canco to file nil T2 returns, but no penalty

What was the CRA position on: (a) the obligation of an inactive Canadian corporation to file a T2 return for each of the years in which there is no business activity and, thus, no tax payable; and (b) the application of late-filing penalties? CRA considered that the reasoning in Exida.com indicates that a Canadian corporation with no taxable income (or a loss) for a year is subject to a s. 162(7) penalty for failure to file a nil return. However, it affirmed its policy that it nonetheless will not assess the penalty in these circumstances.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 162 - Subsection 162(7) no penalty imposed where failure to file a nil T2 return 191

10 October 2014 APFF Roundtable Q. 27, 2014-0538211C6 F - 2014 APFF Roundtable, Q. 27 - Various issues re: administration of the Act

reporting of income-generating websites on Sched. 88 (info only, but not bank, sites excluded)

(e) Will CRA accept an estimate of the percentage of revenue generated in Sched. 88?

(f) Is Schedule 88 required to be completed by a financial institution that allows clients to access their bank account via the Internet?

CRA responded (TaxInterpretations translation):

…(e)…[W]here after making reasonable efforts, the taxpayer is not in a position to provide the exact percentage of its revenue derived from all its internet business activities, a reasonable estimate of these will be acceptable.

…(f)…[I]n general, a taxpayer will not have to declare a website which does not directly generate income. For example, the following types of websites are not included:

  • Telephone directory sites which list the web or site page of the business
  • Web pages or sites which only provide information.

Generally, banks generate income through their websites, for example, from transaction, fund transfer and cheque order charges. Accordingly,…these sites must be declared.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 162 - Subsection 162(7.1) no T5013/T3 late filing penalty where filing after waiving of filing requirement 31

28 November 2011 November CTF Roundtable, 2011-0426591C6 - Deemed services permanent establishment

A US partnership (USFirm) subcontracts part of its contract, to perform consulting services to an arm's length Canadian customer (Canco), to an arm's-length Canadian professional firm (CanFirm) and Reg. 105 witholding is deducted by Canco on payments made to USFirm. In response to queries as to whether CRA require every partner of USFirm that is allocated income pertaining to the activities in Canada to file a Canadian tax return to claim its share of the withholding, and whether CRA requires every partner that is a corporation to file a Canadian corporate income tax return under the "carrying on business in Canada" criteria, CRA stated:

There is currently no administrative procedure whereby a refund can be issued in respect of a particular non-resident partner's share of the Regulation 105 withholding without that partner filing a tax return. However, where a partnership can demonstrate, based on treaty protection, that the normally required withholding is in excess of the ultimate tax liability, the partnership can make an application for a treaty-based waiver of Regulation 105 withholding on behalf of the partnership.

Corporate members of a partnership must file an income tax return pursuant to paragraph clause 150(1)(a)(i)(B) if they carry on business in Canada (i.e. including through a partnership).

Locations of other summaries Wordcount
Tax Topics - Income Tax Regulations - Regulation 105 - Subsection 105(1) partnership subject to Reg. 105 withholding 206
Tax Topics - Treaties - Income Tax Conventions - Article 5 subcontracting 199

Corporation income tax return

All resident corporations (except Crown corporations, Hutterite colonies and registered charities) have to file a corporation income tax (T2) return every tax year even if there is no tax payable. This includes:

  • non-profit organizations;
  • tax-exempt corporations; and
  • inactive corporations.

T2 SCH88 Internet Business Activities

File this schedule if your corporation earns income from one or more webpages or websites.

Paragraph 150(1)(c) - Trusts or estates

See Also

Lussier v. The Queen, 2000 DTC 1677 (TCC)

late designation by letter was valid return amendment

In finding that a subsequently-filed letter request was a valid late designation under s. 104(13.1), Archambault J stated (at paras. 25, 26):

[A]lthough there is no general provision in the Act authorizing Canadian taxpayers to amend tax returns already filed, there is nothing to prevent them from doing so…[and] it is in the interest of tax administration to allow such amendments. …

…[T]he letter…was an amendment to the estate's tax return and its effect was to amend the initial return.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(13.1) late designation by letter was valid return amendment 160

Administrative Policy

Undated, Rulings Division Summary (Tax Window, No. 3, p. 31, ¶1251)

A T3 return must be filed where a taxpayer has died, even where no trust is created by the deceased's will, the estate is liquidated within six or seven months and the beneficiaries are instructed by the executor to report their respective shares of the only income of the trust.

Paragraph 150(1)(d) - Individuals

Cases

Rezek v. Canada, 2005 DTC 5373, 2005 FCA 227

After confirming the Minister's position that the taxpayer and his wife were engaged in spread transactions as a partnership, and therefore that losses generated by the taxpayer could not be exclusively allocated to him (see summaries under ss. 96 and 248(1) - "property"), Rothstein JA found that s. 39(4) elections that were made with late-filed returns were valid.

The Minister argued that the s. 150(1) requirement that returns be filed on 30 April of the year following the taxation year, and the s. 39(4) requirement that the election be filed with a return, established a 30 April deadline for the election. Rothstein JA stated (at para. 114):

Where the Act prescribes sanctions for late filing, those sanctions will apply. Where it does not, the Court will not read into the Act sanctions that do not appear.

See Also

Saunders v. The Queen, 2010 DTC 1099 [at 3025], 2010 TCC 114 (Informal Procedure)

A CRA office set up a deposit box for returns. The taxpayer's return was not late, given that the taxpayer's accountant testified that he delivered the return on the 29th of April, and that the CRA office had no timestamp process in place.

Subsection 150(1.1)

Paragraph 150(1.1)(b)

Cases

Takenaka v. Canada (Attorney General), 2018 FC 347

no requirement for individual with nil Part I tax liability to timely file T1

The taxpayer, who had no Part I tax payable for her 2011 and 2012 years, decided in 2014 to file returns for those years in order to make Canada child tax benefit claims. With her returns she also filed the T1135s for those years reporting her co-ownership interest in a Florida property (with the other interest already having been timely reported by her husband). CRA assessed late filing penalties under s. 162(7)(a) respecting the late T1135s – and then, on a second-level review, cancelled the penalty for 2012 but not for 2011. This could be viewed as the taxpayer being penalized for not feeling guilty and, therefore, not using voluntary disclosure proceedings.

Rather than appealing the penalty (see Douglas), she went to the Federal Court. Mosley J sent the file back for a redetermination on the issue of the penalty for 2011, partly on the basis that the CRA delegate had incorrectly considered the 2011 and 2012 income tax returns to be overdue (so that there was little excuse for not also timely filing the related T1135s), whereas in his view she was under no obligation to file such returns. He stated (at para. 46):

She was not required to file a tax return for 2011 before the deadline in 2012. The requirement to file a return for 2011 only arose when she decided to claim the CCTB in 2014.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 220 - Subsection 220(3.1) CRA to reconsider a penalty imposed for failure to timely file a T1135 by a taxpayer with a nil Part I tax liability 333
Tax Topics - Income Tax Act - Section 162 - Subsection 162(7) CRA delegate failed to consider that, as there was no obligation to file a nil Part I tax return, it was reasonable not to timely file a T1135 184

Subparagraph 150(1.1)(b)(i)

Administrative Policy

28 June 2017 External T.I. 2017-0705431E5 - funds held in settlement account

class-action settlement fund was required to file T3 returns

Settlement funds received by a law firm from the defendant in a class action suit are held in a settlement trust, to be applied solely for compensating class members after approval of the terms of the settlement by final Court order. In the meantime, a T5 slip is issued annually to the “law firm in trust” respecting interest earned on these funds. After finding that the trust was taxable on the interest income, CRA stated respecting the trust’s reporting requirements:

The general requirement for a trust to file a return is provided for in paragraph 150(1)(c) … and [Reg.] 204 … . However, subsection 150(1.1) … provides that the trust is required to file an income tax return pursuant to paragraph 150(1)(c) if tax is payable by the trust … . Furthermore, subsection 204(1) … provides that every person having control of or receiving income, gains or profits in a fiduciary capacity must file a return. Therefore, a T3 return is required to be filed by the trustees of a trust where they have control of or are in receipt of income, gains or profits of the trust.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 149 - Subsection 149(1) - Paragraph 149(1)(w) court-supervised settlement fund for class action was not required by a law 177
Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(c) litigation settlement trust with class action beneficiaries required to pay tax and file T3 returns 114

Subsection 150(1.2)

Articles

Joint Committee, "July 27, 2018 Legislative Proposals", 10 September 2018 Submission

Narrowness of the exceptions (pp. 3-6)

The exceptions in ss. 150(1.2)(a) to (n) are too narrow:

  • Re s. 150(1.2)(b): its $50,000 limit should be based on cost amount rather than FMV.
  • Re s. 150(1.2)(a): escrow arrangements in commercial transactions often exceed three months and, in any event, there should be a non-time limited exception for trusts whose principal purpose is to secure arm’s length sale-agreement covenants.
  • There should be a separate exception for trusts principally holding personal-use family property.
  • Re s. 150(1.2)(i): the exception for GRE estates is problematic since a return designation as such is required, so that it should extend to estates that otherwise would have been a GRE and that are promptly wound up.
  • Re s. 150(1.2)(c): the apparent requirement for lawyers to file a tax return disclosing inter alia the client name and trust amount re a client-specific trust is contrary to s. 8 of the Charter (see Chambre des Notaires).

Subsection 150(5)

Paragraph 150(1)(b)

Administrative Policy

15 May 2019 IFA Roundtable Q. 6, 2019-0798861C6 - Non-resident filing income tax return

non-resident partners of a partnership that has disposed of TCP must file Part I returns even if a s. 116 certificate indicates that all Part I tax is paid

Where a s. 116 certificate is issued respecting a disposition of taxable Canadian property (that is not treaty-protected property) by a partnership with numerous non-resident partners, and all Canadian taxes owing on the resulting taxable capital gain have been paid, is no Part I tax considered to be payable by the non-residents for the purposes of s. 150(5)(b), such that the disposition will be an “excluded disposition”?

CRA indicated that non-resident taxpayers are required under s. 150 to file a Canadian tax return if inter alia Part 1 “tax is payable” for the year, being the amount payable before deducting any amounts paid on account of tax, such as instalments or withholding. This interpretation applies to “tax is payable” in ss. 150(1), 150(1.1), and (respecting the definition of “excluded disposition”) 150(5)(b). Therefore, even if a s. 116 certificate has been issued indicating that all Part 1 tax has been paid, there would be no excluded disposition.

Words and Phrases
tax is payable
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 150 - Subsection 150(1) - Paragraph 150(1)(a) "tax is payable" even if already paid 175

Subsection 150(2) - Demands for returns

Cases

R. v. Merkle, 80 DTC 6027, [1971] CTC 519 (Alta. C.A.)

(1) The use in s. 150(2) of the language "whether or not he is liable" (suggesting that Parliament "did not intend to rule out 'all' defences, only that one"), (2) the reference to a "reasonable" time for complying, and (3) the fact that taxpayers in remote locations or an incapacitated state might not be able to respond within the stipulated time, all indicate that s. 150(2) creates a strict liability rather than an absolute liability offence. The taxpayer accordingly was able to exculpate himself by establishing that he had exercised due diligence, i.e., he had provided an accountant with the requisite data and instructed him to complete and file a return, but the return was not filed until after the stipulated time.

Subsection 150(3) - Trustees, etc.

Administrative Policy

14 March 2013 Internal T.I. 2012-0451131I7 - Trustee's Rights & Obligations under the Act

Although s. 22 of the Bankruptcy and Insolvency Act requires a trustee to file only the return for the taxation year before the year of bankruptcy, and the return for the year of bankruptcy, s. 164(2.01) of the Act forbids the Minister from paying a refund where returns have not been filed under the Act. Therefore, unless the trustee complies with subsections 150(3) and 164(2.01) of the Act (i.e., filing all outstanding returns), the Minister cannot pay out any refunds otherwise payable to the taxpayer.