Section 162

Subsection 162(1) - Failure to file return of income

Cases

Carlson v. The Queen, 73 DTC 5192, [1973] CTC 360 (FCTD)

"temporary" return lacked prescribed information

When the taxpayer's accountant was advised that the taxpayer would be away on business in April, he filed an unsigned return on April 30 marked as a "temporary return" and not containing all the prescribed information. A proper return was filed after April 30. The late-filing penalty was exigible because the temporary return would not have been binding on the taxpayer. "I know of no principle which entitles a taxpayer to avoid the penalty for late filing by sending in a document which is not intended to be the taxpayer's income tax return but merely an intimation that a return will be filed at some later date."

See Also

Klopak v. Canada (Attorney General), 2019 FC 235

voluntary disclosure of FTC adjustment resulted in penalty

Although the facts are quite unclear, what may have happened is that the Canadian-resident individual, who worked in the U.S. as a subcontractor to a rock band, originally filed late Canadian tax returns on the basis that his Canadian tax liability was offset by foreign tax credits for the U.S. taxes payable on his income. However, on getting advice, he later determined that he was Treaty-exempt on that income, sought a refund of the U.S. taxes, and filed amendments to his Canadian returns, showing Canadian taxes payable. CRA (in addition to assessing the Canadian income taxes payable and interest) also assessed him penalties since it now appeared that at the time of the original filing of his “nil” returns, Canadian taxes in fact had been owing.

The taxpayer argued inter alia (at para. 30) that as he “came forward with a voluntary disclosure in a timely fashion … it was unreasonable for the [CRA] Delegate to not exercise discretion in waiving the penalties.”

McVeigh J denied penalty relief essentially on the basis that the taxpayer did not fall within the conventional narrow criteria of CRA in IC-07 for penalty relief, e.g., no extraordinary circumstances justifying the late filing of the returns, such as natural disaster, had been established, and that this situation also did not fall within the four corners of CRA’s published voluntary disclosure program.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 220 - Subsection 220(3.1) apparent denial of penalty relief for voluntarily disclosing a tax return error 431

Rousseau v. Agence du revenu du Québec, 2018 QCCQ 7340

taxpayer established that failure to file Quebec returns was based on good faith reliance on his accountant’s view of his Alberta residency

The taxpayer, who performed his work for various employers at pipeline sites outside Quebec for most of the taxation years at issue (2003 to 2011), but kept his house in Quebec, where his wife and children stayed and where he stayed as well on vacation or longer leave periods. Allen JCQ found that the taxpayer continued to reside in Quebec for those taxation years.

However, in finding that Mr. Rousseau had made out a due diligence defence to the imposition of penalties under the Quebec equivalent of ITA s. 162(1) for failure to file Quebec income tax returns for those years, Allen JCQ stated (at para. 60, TaxInterpretations translation), in accepting oral testimony of the taxpayer to this effect, that the taxpayer “relying on the independent opinion provided by his accountant, believed sincerely and in good faith that he was resident in Alberta.”

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 2 - Subsection 2(1) taxpayer, who worked mostly outside Quebec, maintained his family home and other strongest residency ties with Quebec 304
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4.2) Quebec Minister advised to take steps under intergovernmental agreement to avoid double taxation 228

Chiang v. The Queen, 2017 TCC 165 (Informal Procedure)

no penalty where reasonable error of fact

The taxpayer made contributions to his RRSP for the years 1995 to 2005 (except 1998). In preparing his 1995 and 1999 returns, he reported his contributions, but failed to deduct them – but thought that he had. Furthermore, in 1997, he overcontributed based on an incorrect impression that he had unused RRSP deduction room. As a result of these errors, he had a cumulative excess amount as calculated under s. 204.2(1.1). CRA assessed him Part X.1 tax under s. 204.1(2.1) and assessed penalties under s. 162(1) for his failure to file returns as required under s. 204.3(1) reporting his Part X.1 tax liabilities.

After confirming the taxpayer’s Part X.1 tax liability and after quoting (at para. 26) a statement in Corporation de l’École Polytechnique v The Queen, 2004 FCA 127 that a due diligence defence is established if “the person believed on reasonable grounds in a non-existent state of facts which, if it had existed, would have made his or her act or omission innocent,” Sommerfeldt J went on to find that the s. 162(1) penalties should be cancelled, stating (at paras 11, and 27):

… I am of the view that his failure to deduct the contributed amounts, which was unbeknown to him, was due to innocent and reasonable inadvertence.

Mr. Chiang genuinely and reasonably believed that he had deducted the contributions that he had made to his RRSP for 1995 and 1999 and that he had unused RRSP deduction room in respect of 1997. Thus, it is my view that Mr. Chiang reasonably believed in, and was operating under, a mistaken set of facts that, if true, would have resulted in there not having been a cumulative excess amount. Therefore, his failure to file tax returns (Form T1-OVP) for 2004 to 2013 resulted from a reasonable error of fact, so as to be excused by the due diligence defence.

Words and Phrases
due diligence
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 204.3 - Subsection 204.3(1) inadvertent overcontributions 141

Friedlander v. The Queen, 2012 DTC 1165 [at 3405], 2012 TCC 163 (Informal Procedure)

After referring to the finding in Les Résidences Majeau v. The Queen, 2010 FCA 28, para. 8 that the due diligence defence extended to situations where the taxpayer "made a reasonable mistake of fact," Paris J. found that the taxpayer should not incur penalties under s. 162(1), in respect of a failure to file the required forms (T1-OVP) on excess contributions made to an RRSP account he held. It was clear that the taxpayer, who had little familiarity with the English language or Canadian investment products, had intended to set up an investment account rather than an RRSP. The bank employee who set up the account had misunderstood the taxpayer's request, and the taxpayer misunderstood the nature of the account he had created and had no reason to believe that excess contributions would ever be an issue.

Jay v. The Queen, 2010 DTC 1101 [at 3031], 2010 TCC 122 (Informal Procedure)

The taxpayer, a high school student at a private school, had established a due diligence defence to liability under s. 162(1) for failure to report bursary income. Woods J. found that, given the taxpayer's age, it was reasonable to rely on his mother's remarks that an accountant had advised her that bursaries were not taxable.

Ford v. The Queen, 95 D.T.C 848 (TCC)

The taxpayer did not file a 1991 return on or before April 30, 1992 because she had no income tax payable for that year. When a subsequent court judgment retroactively gave rise to a 1991 tax liability pursuant to s. 56.1(3), she filed her 1991 return within 90 days thereafter.

Bell TCJ. found that no penalty was payable because the taxpayer had used due diligence in filing on this basis, and because, if she had filed a 1991 income tax return on April 30, 1992 there would have been no requirement for the filing of a second return by her following the court's judgment.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 161 - Subsection 161(1) 94

Feuiltault v. The Queen, 94 DTC 1657 (TCC)

Before finding the taxpayer liable for late-filing penalties, Lamarre Proulx TCJ. stated (p. 1659):

"I do not have to decide in the instant appeal whether the offence under subs. 162(1) of the Act is in the nature of an offence of strict liability or absolute liability since the appellant did not prove that he had taken all reasonable precautions in carrying out the prescribed act."

Reemark Chelsea Terraces Project Ltd. v. The Queen, 93 DTC 469 (TCC)

Because the penalty under s. 162(1) was to be calculated at the time the return was required to be filed, the penalty in this case was not eliminated by the subsequent carrying back to the taxation year in question of a non-capital loss arising in the subsequent taxation year.

Administrative Policy

11 June 2014 Internal T.I. 2014-0519701I7 - Filing a NIL return to avoid late-filing penalties

return with substantive missing elements

Can CRA refuse to accept either a NIL tax return (which does not report any of the transactions on which tax is payable) or a substantially incomplete tax return? CRA stated:

[W]here all or some of the necessary and substantive elements on the prescribed form are missing, or incorrectly stated…CRA may refuse to accept the return, and may assess any applicable penalties. Further, even if the CRA has accepted the initial return of income and issued a notice that no tax is payable, late-filing penalties, such as subsection 162(1) or (2) may be assessed at the time the taxpayer files the amended tax return and it is identified that the initial return of income was not a valid return.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) - Paragraph 152(4)(a) - Subparagraph 152(4)(a)(i) return with substantive missing elements 111
Tax Topics - Income Tax Act - Section 163 - Subsection 163(2) return with substantive missing elements 55

93 C.R. - Q. 51

Although a return of income is required where a non-resident corporation is subject to tax under Part I but is exempt under a treaty, penalties will not be applied provided that no tax is payable.

Subsection 162(2) - Repeated failure to file

See Also

Hughes v. The Queen, 2017 TCC 95 (Informal Procedure)

no penalty if return filed within period demanded

The taxpayer filed his return more than eight months after the filing due date for the year in question and had previously been subject to a late-filing penalty. A federal penalty of $29,225.45 was assessed for the year under s. 162(2).

Jorré J found (at paras 61, 62, 63 and 64):

The English language version of the text of subsection 162(2) seems to simply require that the demand be sent and nothing more; the French language version requires that the person fail to file the return within the time limit set out in the demand.

It is hard to see what purpose is served if all that is required is that the Minister send the demand and nothing more. … If failing to respond to the demand does not matter, why is the condition in paragraph 162(2)(b) needed at all?

When one considers the scheme and purpose of these provisions, as well as their history, the French language text which focuses on compliance with the demand, rather than the mere sending, is clearly more consistent with the scheme.

As a result…[s]ubsection 162(2) cannot apply unless the taxpayer has failed to file within the time period set out in the demand.

Before vacating the penalty (subject to the $25,000 informal procedure limit) notwithstanding that the taxpayer had not established a due diligence defence, Jorré J stated (at para. 75):

… [G]iven that the Respondent did not plead that it made an assumption or finding of fact that the Appellant failed to comply with the time limit in the demand, there was no onus on the Appellant to prove that he did. …

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 220 - Subsection 220(3) computation of penalty where extension 92
Tax Topics - Statutory Interpretation - French and English Version more lenient French version of the repeated-failure-to-file penalty in s. 162(2) preferred to English version 85

Kreuz v. The Queen, 2012 DTC 1201 [at 3514], 2012 TCC 238 (Informal Procedure)

D'Auray J. accepted the taxpayer's argument that the Minister could not impose s. 162(2) penalties in respect of the making of a demand to file returns for the taxpayer's 2006 and 2007 taxation years because the Minister had failed to serve the required notice under s. 150(2). There was no reason to question the taxpayer's credibility, and the Minister had filed no evidence to the contrary.

Ottawa Ritz Hotel Company Limited v. The Queen, 2012 DTC 1172 [at 3427], 2012 TCC 166 (Informal Procedure)

Webb J. took the position that, as a due diligence defence was available for s. 162(1), it should also be available for s. 162(2). In the present case, however, the taxpayer could not make out a due diligence defence in respect of the death of the taxpayer's president's wife, as the death occurred more than a year after the relevant return was required to be filed. The taxpayer's accountant suffered a similar personal loss more than a year and a half after the deadline.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 129 - Subsection 129(1) 49
Tax Topics - Income Tax Act - Section 129 - Subsection 129(3) RDTOH not extinguished by three-year limitations period on dividend refund 49

Bennett v. The Queen, 96 DTC 1630 (TCC)

Although the wording of s. 162(2) allowed a defence of due diligence, it was found (at p. 1634) that such a defence was not established in this instance: "complexity of the fiscal situation, moving and one's own financial situation are not elements of excuse for not filing on time an income tax return."

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 165 - Subsection 165(7) 42

Farm Business Consultants Inc. v. The Queen, 95 DTC 200 (TCC), briefly aff'd 96 DTC 6085 (FCA)

The taxpayer was found to have committed "gross negligence" (which Bowman TCJ. stated (at p. 205) "implies conduct characterized by so high a degree of negligence that it borders on recklessness"), or to have knowingly made a false statement, when it deducted "management fees" in its tax returns pursuant to a consulting agreement whose legal substance was the provision of consideration for the purchase by the taxpayer of goodwill. Bowman J. also stated (at p. 205) that in a case entailing the application of s. 163(2):

"A court must, even in applying a civil standard of proof, scrutinize the evidence with great care and look for a higher degree of probability that would be expected where allegations of a less serious nature are sought to be established."

Subsection 162(2.1) - Failure to file - non-resident corporation

Cases

Cogesco Sevices Ltd. v. Attorney General of Canada, 2013 CF 1238

relief from penalty

The taxpayer, which was a non-resident corporation that had no liability for tax as a result of losses, was assessed for $15,000 of penalties under s. 162(2.1) (plus interest) for its failure to file returns for its 2005 to 2010 taxation years. The taxpayer sought relief under s. 220(3.1) for $12,500 of these penalties (conceding that there should be no relief for 2010 given the Federal Court of Appeal decision in that year in Exida.com establishing that a penalty of $2,500 was payable for that year under s. 162(7) (rather than under s. 162(2.1).)

The taxpayer sought relief on the basis of the conflict between the Goare and Exida.com Tax Court decisions as to the application in these circumstances of s. 162(2.1), and the finding at the Federal Court of Appeal that this provision did not apply (but, rather, was supplanted by s. 162(7) (paras. 10, 20)).

CRA did not grant relief, on the basis that the Federal Court of Appeal had established that the penalty was payable. In granting the application for judicial review, Roy J stated (at para. 21) (TaxInterpretations translation) "quite simply, the reasons given for refusing the request for relief did not correspond in any way with the argument advanced by the applicant."

Exida.Com Limited Liability Company v. Canada, 2010 DTC 5101, 2010 FCA 159

no substantive tax liability

A non-resident corporation which failed to file corporate income tax returns but which had no income taxes payable in Canada was not subject to the penalty under s. 162(2.1) as it was not potentially subject to any penalty under s. 162(1) or (2) and therefore was not "liable to" a penalty under such provisions. However, it was subject to a penalty in the same amount under s. 162(7).

Words and Phrases
liable
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 162 - Subsection 162(7) "penalty" does not include nil penalty 90
Tax Topics - Statutory Interpretation - Ordinary Meaning purposive interpretation must be consistent with words 87
Tax Topics - Statutory Interpretation - Territorial Limits no filing requirement if no connection with Canada 77

See Also

Kokanee Placer Ltd. v. The Queen, 2016 TCC 63 (Informal Procedure)

Goar overruled

Before finding the taxpayer liable for a s. 162(7.2) penalty, Paris J stated (at para. 10) that s. 162(2.1) "was a different penalty provision" and (at para. 12) noted that Goar "was effectively overturned" by Exida.com.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 162 - Subsection 162(7) due diligence defence available but mistaken belief re filing requirement no defence 176

Exida.Com Limited Liability Company v. The Queen, 2009 DTC 1278, 2009 TCC 373 (Informal Procedure), rev'd above.

The taxpayer, which was a non-resident corporation that filed tax returns for the relevant taxation years late but with no tax owing, was liable to a penalty under s. 162(2.1). The ordinary meaning of the word "liable" ("responsible at law"), the contrasting use of the terms "liable" and "payable" in the relevant provisions and the fact that this interpretation was consistent with an interpretation that the enactment of s. 162(2.1) was intended by Parliament to put some teeth into the filing requirements for non-resident corporations, suggested that a corporation would be considered to be "liable to a penalty" under s. 162(1) even if such penalty was nil.

Words and Phrases
liable

Goar, Allison & Associates Inc. v. The Queen, 2009 DTC 653, 2009 TCC 174 (Informal Procedure)

The taxpayer would not have been liable for a penalty under s. 162(1) because it had no income. Accordingly, s. 162(2.1) could not apply to it.

Administrative Policy

13 January 2005 Internal T.I. 2004-010329 -

"The unambiguous language of subsection 162(2.1) clearly indicates that it will apply to all non-resident corporations under an obligation to file a return pursuant to either of subparagraphs 150(1)(a)(i) and (ii), including non-resident corporations that carry on business in Canada during the year or that dispose of taxable Canadian property."

Subsection 162(6) - Failure to provide identification number

Administrative Policy

30 May 1990 T.I. (October 1990 Access Letter, ¶1481)

Individuals under 18 are not required to provide a social insurance number if their total income for the year is $2,500 or less.

Subsection 162(7) - Failure to comply

Cases

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

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

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.

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 150 - Subsection 150(1.1) - Paragraph 150(1.1)(b) no requirement for individual with nil Part I tax liability to timely file T1 219

Exida.Com Limited Liability Company v. Canada, 2010 DTC 5101, 2010 FCA 159

"penalty" does not include nil penalty

A non-resident corporation which failed to file corporate income tax returns but which had no income taxes payable in Canada was not subject to the penalty under s. 162(2.1) as it was not potentially subject to any penalty under s. 162(1) or (2) and therefore was not "liable to" a penalty under such provisions. However, it was subject to a penalty in the same amount under s. 162(7) given that it would not be a proper construction of the word "penalty" to find that it had been subjected to a nil penalty under s. 162(1).

Words and Phrases
penalty
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 162 - Subsection 162(2.1) no substantive tax liability 64
Tax Topics - Statutory Interpretation - Ordinary Meaning purposive interpretation must be consistent with words 87
Tax Topics - Statutory Interpretation - Territorial Limits no filing requirement if no connection with Canada 77

See Also

Apex City Homes Limited Partnership v. The Queen, 2018 TCC 247 (Informal Procedure)

due diligence defence was not available where the taxpayer incorrectly disagreed with a CRA position

A partnership (Apex) hired a general contractor to construct condos which it then sold. It was required under Reg. 238(2) to file T5018s if its business income was “derived primarily from” construction activities, and had failed to file them. MacPhee J rejected Apex’s argument (made at para.18) that it was not in the business of constructing condos but, rather, “in the business of selling condos after they are constructed.”

In further finding that Apex had not made out a due diligence defence to the imposition of s. 162(7) penalties, MacPhee J noted (at para. 25) the statement in l’École Polytechnique, 2004 FCA 127, at para. 28 that “due diligence excuses either a reasonable error of fact, or the taking of reasonable precautions to comply with the Act,” and then found that here Apex had become aware of CRA’s position that T5018s should be filed but “simply did not accept the CRA’s position that they had to file a Form T5018, and therefore they chose not to do so” (para. 31).

Locations of other summaries Wordcount
Tax Topics - Income Tax Regulations - Regulation 238 - Subsection 238(2) business of contracting out condos’ construction, and then selling them, was caught 167

RAR Consultants Ltd. v. The Queen, 2017 TCC 214 (Informal Procedure)

requirement for T1134 was not based on whether information otherwise available

The taxpayer was assessed under s. 162(7) for $12,500 in penalties for failure to file T1134 forms in respect of its specified foreign property, which consisted of a 28% interest in a Bermuda company. Respecting a submission that “there was no purpose or utility” in filing the T1134 forms, he stated, (at para 35):

…[T]here is nothing in the Act to indicate that Parliament intended to relieve a reporting entity from filing a T1134 return where the Minister could otherwise discover elsewhere the information from material or other returns on file. …

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 233.4 - Subsection 233.4(4) a foreign affiliate with diminished FMV was not excluded from T1134 reporting 235

Kokanee Placer Ltd. v. The Queen, 2016 TCC 63 (Informal Procedure)

due diligence defence available but mistaken belief re filing requirement no defence

Upon returning to Canada, the taxpayer’s sole shareholder and director (“Stephenson”) filed its 2014 tax return in July 2014 in paper form. It showed gross revenue of $1,073,838.56 (i.e., somewhat higher than the $1 million threshold in s. Reg. 205.1(2)). Stephenson testified that he was unaware at that time of the electronic filing requirement. A Notice of Assessment dated June 13, 2013 had imposed a s. 162(7.2) penalty of $500 for a preceding taxation year. In response to Stephenson’s submission that no penalty was payable because no tax was payable for the year, Paris J. stated (at para. 11):

The wording of subsection 162(7.2)… does not make the penalty for failing to file an electronic return conditional in any way on tax being payable by the corporation.

He also stated (at para. 15):

A mistake as to the existence of the electronic filing requirement set out in subsection 150.1(2.1) of the Act is a mistake of law and is not a defence to the subsection 162(7.2) penalty in issue.

Although a due diligence defence was available under s. 162(7.2), due diligence was not made out on the facts.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 162 - Subsection 162(2.1) Goar overruled 33

Suissa v. Canada (Attorney General), 2013 DTC 5158 [at 6383], 2013 FC 897

penalties on six family members were reasonable but probably unjust

The taxpayers were six family members, each of whom owned a small percentage of some properties in Canada, which were sold at a loss over two years. The Minister assessed penalties under 162(7), which amounted to $10,000 each.

Roy J upheld the Minister's rejection of the taxpayers' applications for relief, but urged the Minister to provide relief anyway. The decisions to deny each of the six (essentially identical) applications were reasonable, as there were no extraordinary circumstances, there had been procedural fairness, and the decision-makers had not fettered their discretion.

Roy J nevertheless urged the Minister to consider relief, given the combined effect of all six penalties, which would have been just one $10,000 fine if the properties had been held by just one person. As the properties were sold at a loss, some measure of relief would clearly be just.

Roy J noted in particular that the situation was not analogous to the Court of Appeal's "volume discount" analysis in Stemijon, where each taxpayer independently entered the arrangement giving rise to penalties. In the present situation, five of the family members were essentially uninvolved in the decision-making (para. 41).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 220 - Subsection 220(3.1) penalties on six family members were reasonable but probably unjust 178

Edwards v. The Queen, 2013 DTC 1025 [at 124], 2012 TCC 430 (Informal Procedure)

VA Miller J found that the taxpayer, who spent an equal amount of time in Canada and the UK, was a Canadian resident based on her personal ties to her daughter who, due to a custody assessment, lived in Edmonton. VA Miller J stated that "her settled routine was that she worked in the UK and she returned to Canada where she resided with her daughter" (para. 23).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 2 - Subsection 2(1) 67

Douglas v. The Queen, 2012 DTC 1114 [at 3083], 2012 TCC 73 (Informal Procedure)

late filing of T1135 was excusable as no obligation to timely file T1

Woods J. found that the taxpayer had a due diligence defence against s. 162(7) penalties in his 2008 taxation year given that the taxpayer had no tax payable for that year. She agreed with the taxpayer that it is "common knowledge" that a taxpayer is allowed to file a return late if no tax is payable (para. 11). Moreover, the taxpayer had complied with the instructions on the T1135 form, which stated that the taxpayer should "complete and file this statement with your tax return...", when he included the T1135 with his return in 2010. Woods J. stated (at para. 14):

Although the penalty in subsection 162(7) is strict and Parliament has not provided for a due diligence defence, this Court has held that even strict penalties should not be applied if a taxpayer has taken all reasonable measures to comply with the legislation... .

Leclerc v. The Queen, 2010 DTC 1209 [at 3556], 2010 TCC 99 (Informal Procedure)

The taxpayer filed his tax returns for his 2003 and 2006 taxation years several years late. Although no tax was owing by him for those years, he was assessed a penalty under s. 162(7) because the T1135 forms included with the returns were thus filed on a late basis. After noting (at para. 15) that "Parliament's intention is to motivate taxpayers who own foreign property whose cost amount exceeds $100,000 to report their foreign source income", Favreau, J. found that the penalty was imposed correctly and that the due diligence defence was not applicable in this case.

Woods, J. found that if (contrary to her findings), s. 162(2.1) did not apply to the taxpayer (a non-resident corporation that was late in filing returns but which had no tax payable for the related taxation years) had not been subject to a penalty under s. 162(2.1), it would not have been subject to any penalty under s. 162(7). The penalty for failure to file an income tax return is provided for in s. 162(1) and, in her view, "it is not relevant that the penalty could be nil" under that subsection (para. 32). Accordingly, s. 162(7) would not apply because a penalty for failure to file returns on a timely basis was nonetheless "set out" in s. 162(1).

Exida.Com Limited Liability Company v. The Queen, 2009 DTC 1278, 2009 TCC 373 (Informal Procedure), rev'd above.

Woods, J. found that if (contrary to her findings), s. 162(2.1) did not apply to the taxpayer (a non-resident corporation that was late in filing returns but which had no tax payable for the related taxation years) had not been subject to a penalty under s. 162(2.1), it would not have been subject to any penalty under s. 162(7). The penalty for failure to file an income tax return is provided for in s. 162(1) and, in her view, "it is not relevant that the penalty could be nil" under that subsection (para. 32). Accordingly, s. 162(7) would not apply because a penalty for failure to file returns on a timely basis was nonetheless "set out" in s. 162(1).

Words and Phrases
set-out

Administrative Policy

6 October 2017 APFF Financial Strategies and Financial Instruments Roundtable Q. 14, 2017-0708511C6 F - T1135 and 162(7) penalty

penalty for late-filing of a T1135 will be imposed automatically

In 2015-0588971C6, CRA indicated that where there has been a voluntary disclosure for failure of the taxpayer to file T1135s for a period of years extending back more than 10 years, the current practice of CRA is to assess the $2,500 per-year penalty for the years before the 10-year period as being before the 10-year period for which CRA is permitted to waive penalties under s. 220(3.1). However, the proposition that “the late-filing penalty of $2,500 under subsection 162(7) applies automatically… is currently under study.” What is the current status of this study? CRA responded:

Having reviewed the question of the automatic application of the $2,500 late filing penalty under subsection 162(7), we are still of the opinion that it applies automatically where all the conditions of that subsection are satisfied.

Furthermore, subsection 220(3.1) does not permit the CRA to waive or cancel a penalty otherwise payable by a taxpayer for a taxation year of a taxpayer beyond the day that is 10 calendar years after the end of that taxation year.

…[A]lthough automatic, the penalty provided for under subsection 162(7) will not be assessed outside the normal reassessment period [as extended under s. 152(4)(b.2)] unless the Minister of National Revenue determines that the exception in paragraph 152(4)(a) [for neglect etc.] is applicable.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) - Paragraph 152(4)(a) - Subparagraph 152(4)(a)(i) failure to file a T1135 treated as a misrepresentation – but neglect etc. ground to be determined 124

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

no penalty imposed where failure to file a nil T2 return

At the 2016 APFF Conference, CRA indicated that an inactive corporation must file an income tax return, but could file a letter explaining the non-filing, and that a penalty would not be automatically imposed. What is the CRA position as to: (a) the obligation 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?

After noting that such filing was required by s. 150(1)(a)(i)(A), CRA stated:

Exida.com … stated that the general penalty in subsection 162(7) was applicable … where a person fails to comply with an obligation imposed on the person … unless another provision of the Income Tax Act provides for a penalty for such default. …

However … the CRA [considers] that since this decision is based on a rather narrow interpretation of the relevant statutory provisions, the penalty under subsection 162(7) will generally not be imposed on resident corporations that failed to file their tax returns where they either had no taxable income or had incurred a loss for the year. The CRA does not intend to change its position in this regard.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 150 - Subsection 150(1) - Paragraph 150(1)(a) requirement for Canco to file nil T2 returns, but no penalty 95

6 October 2017 APFF Roundtable Q. 2, 2017-0709001C6 F - T4A filing obligation

"temporary" policy for not applying penalties for failure to issue T4As to independent contractors

Where an invoice for services rendered bears a valid GST/HS registration number, would failure to file a T4A result in the application of the penalty? CRA responded:

In 2010, the T4A form was amended to add Box 048 "Fees for services--Business income"… . At that time, the CRA had announced a temporary measure specifying that taxpayers would not be penalized for failing to properly fill in Box 048. However, this has never had the effect of relieving taxpayers of their responsibility to report these payments.

Thus, a penalty under subsection 162(7) is applicable for non-filing if payments for services are not reported on the T4A form, even if an invoice with valid tax numbers is provided to the payer.

Locations of other summaries Wordcount
Tax Topics - Income Tax Regulations - Regulation 200 - Subsection 200(1) penalty applicable but not necessarily applied for failure to complete fee box 110

May 2016 Alberta CPA Roundtable, Q.17

penalty not an absolute liability penalty

CRA acknowledges that assessing a s. 162(7) penalty for failure to file T1135s for periods before the normal reassessment period (as potentially extended by three years under s. 152(4)(b.2)) would require CRA to demonstrate that such failure “was an error that a prudent and conscientious person would not have made,” and then stated that in order for failure to file T1135s to be exonerated under the voluntary disclosure program, “the taxpayer would have to complete the T1135 for all years for which such filing was required.”

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) - Paragraph 152(4)(a) - Subparagraph 152(4)(a)(i) onus on CRA re assessing T1135 penalties outside normal statute-barring periods 57
Tax Topics - Income Tax Act - Section 220 - Subsection 220(3.1) T1135 filings for all years required 33

26 May 2016 Alberta CPA Roundtable, 2016-0645001C6 - Failure to file Form T1135

failure to file a T1135 may not indicate carelessness or neglect

CRA considered that a s. 162(7) penalty for failure to file a T1135 form can be assessed beyond the normal reassessment period (or, under s. 152(4)(b.2), beyond the normal reassessment period plus three years where the taxpayer did not report income from specified foreign property in the relevant return) but, in such a case, CRA would have to “prove” that “although that error may have been made in good faith, it was an error that a prudent and conscientious person would not have made.”

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) - Paragraph 152(4)(a) - Subparagraph 152(4)(a)(i) onus to establish carelessness or neglect where failure to file a T1135 102

12 April 2016 External T.I. 2015-0595461E5 - Australian Super Fund & T1135

no penalty for reasonably estimating an unknown amount, e.g., the “cost amount” of a pension interest

An Australian Superannuation Fund (or “Super Fund”) is a government-regulated trust that has been registered and approved by the Australian Government and is funded by contributions from employers and individuals over their working lives in order to provide retirement incomes. After concluding that a Canadian beneficiary’s interest is considered to be specified foreign property, and the individual is required to file T1135s reporting inter alia the “cost amount” of the individual’s interest in the fund, and that such cost amount included all future amounts which the individual was legally entitled to receive from the Super Fund, CRA stated:

…[W]here it is not possible to determine the cost amount of a specified foreign property, taxpayers should use their best efforts to reasonably estimate the cost amount of the property. [CRA] will not penalize taxpayers who have made reasonable estimates based on the best available information. The onus is on the taxpayer to demonstrate the reasonableness of any such estimates, if requested… .

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 233.3 - Subsection 233.3(1) - Specified Foreign Property - Paragraph (n) Australian pension fund subject to 10%-15% tax rate not an exempt fund 285
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Cost Amount - Paragraph (e) cost amount of pension rights includes future amounts to which legal entitlement 174
Tax Topics - Income Tax Act - Section 233.2 - Subsection 233.2(1) - Exempt Trust Australian Superannuation Fund not an exempt trust due to taxability 103

9 October 2015 APFF Financial Strategies and Financial Instruments Roundtable Q. 4, 2015-0588971C6 F - T1135 and voluntary disclosure

CRA is studying whether the $2,500 penalty for late T1135 filings applies automatically

Where there has been a voluntary disclosure for failure of the taxpayer to file T1135s for the past, say, 15 years, the current practice of CRA is to assess the $2,500 per-year penalty for the first five years as being before the 10-year period for which CRA is permitted to waive penalties under s. 220(3.1). However, the proposition that “the late-filing penalty of $2,500 under subsection 162(7) applies automatically… is currently under study.”

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 220 - Subsection 220(3.1) currently no waiver of T1135 penalty before 10 years previously 71

15 September 2015 Internal T.I. 2015-0572771I7 - T1135 - Normal Reassessment Period

unlike s. 216 returns, the assessment of s. 162(7) penalties is subject to the same normal reassessment period as for the Part I return

CRA confirmed its position that, as a s. 216 return is a distinct return from a normal Part I return, it has its own normal reassessment period. However, the same does not apply to the imposition of penalties under s. 162(7) for failure to file T1135 returns, as the income from foreign properties in question is required to be reported on a normal Part I return rather than a distinct return – so that such a penalty must be reassessed within the normal reassessment period for that return.

See summary under s. 152(4).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) unlike s. 216 returns, the assessment of s. 162(7) penalties is subject to the same normal reassessment period as for the Part I return 154

14 July 2014 Internal T.I. 2014-0537701I7 F - Voluntary disclosure - T1134 and FAPI

penalties under ss. 162(10), (10.1) or 163(2.4) for failure to file T1134s

Representatives of a taxpayer initiated a voluntary disclosure for a taxpayer who had not filed T1134s and who had failed to report foreign accrual property income (or related FAPL or FACL deductions). Without being asked about the penalties that would apply if a disclosure did not meet the requirements of the voluntary disclosure programme, Headquarters noted that a T1134 is required for each foreign affiliate for each post-1995 year, and that a s. 162(7) assessment "must be made by the Minister before the expiration of the normal reassessment period," but referred to the exception for carelessness etc. and the potential three-year extension under s. 152(4)(b)(iii). However, the penalties under ss. 162(10) or (10.1), or s. 163(2.4), which could be engaged only in circumstances of gross negligence etc., generally could be imposed without time limitation.

5 June 2014 Internal T.I. 2013-0509051I7 - Penalties beyond the Normal Reassessment Period

carelessness sufficient to assess beyond normal reassessment period

The level of culpability required to assess beyond the normal reassessment period (in this case, a penalty under s. 162(7)) pursuant to s. 152(4)(a)(i) (i.e., "neglect, carelessness or wilful default") is lower than that required to assess a penalty for gross negligence such as under s. 163(2) or 162(10) (i.e., "knowingly, or under circumstances amounting to gross negligence").

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) - Paragraph 152(4)(a) - Subparagraph 152(4)(a)(i) carelessness sufficient to assess beyond normal reassessment period 58

17 February 2014 Internal T.I. 2013-0498121I7 - Follow up to XXXXXXXXXX

diplomatic exemption/discretion if property sold at loss

During a Canadian posting, a diplomat purchased a property in another city for his adult child, and then sold it to the child (without applying for a s. 116 certificate) when the posting ended. The child subsequently sold the property at a loss upon leaving Canada, and applied late for a s. 116(4) certificate. After finding that there was no exemption for the diplomat in Art. 34 of the Vienna Convention on Diplomatic Relations from the s. 162(7) penalty as the property "was not held on behalf of the sending State as part of the mission," nor was there any exemption for the child, CRA stated that "you may wish to consider exercising discretion in assessing the penalty given that….there was a loss on the property."

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 116 - Subsection 116(3) diplomatic exemption/discretion if property sold at loss 123

6 December 2012 Internal T.I. 2012-0458401I7 - Penalties - Foreign Reporting Forms

s. 162(5) or (7) choice

Respecting whether the penalty under s. 162(5) or (7) should be imposed where foreign reporting forms (e.g., T1134, T1135 or T1142) were incomplete, CRA stated:

The importance of the information that is missing from a prescribed form will determine [which] penalty…is applicable. Subsection 162(5) applies in situations where the prescribed form is filed, but the form is missing information which does not affect the substance of the form. However… where…the form is substantially incomplete, the applicable penalty would be provided by paragraph 162(7)(a) if a valid return is not received by the filing deadline.

CRA also noted:

[T]he required information provided by the forms is entered into the Foreign Reporting Requirements Management System (FRRMS) by the OTC [Ottawa Technology Centre]. The ... information from the FRRMS provides the main risk assessment tool for Aggressive Tax Planning and international auditors.

12 December 2013 Internal T.I. 2013-0497231I7 - Penalties on Foreign Asset Reporting

s. 152(4)(a) applies to Part XV returns

What are the time limitations for assessing a penalty on foreign asset reporting? After noting that no limitation period for a Part XV information return commences running if the return has not been filed, CRA further indicated that s. 152(4)(a)(i) will apply to permit the assessment of a s. 162(7) penalty beyond the normal reassesment period (or such period as it is to be extended by three years under proposed s. 152(4)(b.2) respecting s. 233.3 returns) if there has been neglect etc.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) S. 152(4)(a) applies to Part XV returns 59
Tax Topics - Income Tax Act - Section 162 - Subsection 162(10.1) normal reassessment period does not apply 52
Tax Topics - Income Tax Act - Section 162 - Subsection 162(10) normal reassessment period does not apply 132

28 November 2010 CTF Annual Roundtable Q. 4, 2010-0386341C6 - CTF Q#4: Penalties for Late-Filed T2 returns

indulgence where nil income

CRA stated that it was never its:

practice to apply subsection 162(7) penalties on resident corporations that are late in filing their returns because there is nil taxable income or a loss for tax purposes. Although the FCA decision in Exida.Com stands, there are no plans to change our practice in this regard.

5 October 2012 APFF Roundtable, 2012-0453211C6 F - Formulaire T1135

CRA is not bound by Douglas

In response to a query respecting the Douglas decision, and as to whether CRA has considered providing administrative relief from the penalty outside the voluntary disclosure program, CRA stated (TaxInterpretations translation):

1. The CRA has considered the Douglas decision. However, that case proceeded under the informal procedure and on that basis, the CRA is not bound by that decision.

2. For the time being, having regard to the current legislation, the CRA is bound to apply the penalty provided in ITA subsection 162(7). No specific mechanism is provided to avoid the penalty.

Respecting the voluntary disclosure program, CRA stated (TaxInterpretations translation):

Each disclosure must satisfy these four conditions:

1. is voluntary, 2. is complete, 3. engages the imposition or potential imposition of a penalty, and 4. comprises information that is more than a year overdue.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 220 - Subsection 220(3.1) criteria for waiver of penalties and interest 109

3 July 2009 Internal T.I. 2009-0312521I7 - Form T106

"Subsection 162(7) is operative only where the Minister serves a reporting person with a demand for the information return, and that person does not comply with the demand within 90 days of service."

4 January 1996 Memorandum 953151 (C.T.O. "T3D, T3P, T3S as Information Returns")

The T3P, T3S and T3R1 forms are information returns for purposes of s. 162(7) by virtue of Regulation 204(1). AT3D (although a tax return) is not considered an information return for purposes of the Act.

6 September 1994 T.I. 941512 (C.T.O. "Consolidation of Information Returns")

A penalty will not be assessed to individual corporations within a corporate group for failure to make separate T5 information returns, where the information required therein is included in a consolidated T5 information return prepared for the entire corporate group.

23 October 1991 Memorandum (Tax Window, No. 12, p. 23, ¶1551)

The Rulings Directorate has never addressed the possibility of applying the penalty in s. 162(7)(b) to a person who fails to obtain a clearance certificate.

Subsection 162(7.01) - Late filing penalty — prescribed information returns

Administrative Policy

11 April 2014 External T.I. 2013-0515121E5 - Application of 162(7.01) and (7.02) penalties

separate penalty for each form

A taxpayer filed 40 T4As and 40 T5s late for the 2013 year. Does the phrase "the number of those information returns" establish one penalty for late-filing 80 information slips or two penalties for the 40 T4As and the 40 T5s? CRA stated:

[T]he reference to "the number of those information returns"…refers to the phrase "of a type" used in the preamble. … Therefore…two separate penalties could be assessed under paragraph 162(7.01)(a)… .

Essentially the same analysis would apply under s. 162(7.02) respecting late electronic filing of 150 T4A slips and 200 T5 slips.

Paragraph 162(7.01)(b)

Administrative Policy

15 August 2018 Internal T.I. 2018-0748441I7 - Subsection 162(7.01) penalty calculation

penalty for late-filing information slips references when the last slip was filed

How is the penalty under s. 162(7.01) calculated for a person who files 73 T5 slips 8 days after the required filing deadline and a further single T5 slip, 56 days after that deadline? The Directorate stated:

[A] person who files the same type of information slips late, but at different times, will be liable to a penalty based on the total number of each type of information slip filed late, and based on the number of days until the last slip has been filed.

…[T]he total number of T5 information slips filed beyond the filing deadline is 74. Therefore, the applicable penalty provided by paragraph 162(7.01)(b) … is $15, multiplied by the number of days, not exceeding 100, during which the failure continued. The total number of days the failure continued was 56 days. As a result, the penalty would be $15 times 56 days, for a total penalty of $840.

Subsection 162(7.1) - Failure to make partnership information return

Administrative Policy

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

no T5013/T3 late filing penalty where filing after waiving of filing requirement

Late-filing penalties under s. 162(7.1) generally will not apply when the requirement to file T5013 or T3 returns has been waived by the Minister, but such forms are filed anyway, but late.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 150 - Subsection 150(1) - Paragraph 150(1)(a) reporting of income-generating websites on Sched. 88 (info only, but not bank, sites excluded) 150

19 February 2003 External T.I. 2003-018142 -

In the event that a partnership information return is not filed within the time set out in Regulation 229(5), the partnership, as opposed to the partners, will be liable for a penalty by virtue of s. 162(7.1).

Subsection 162(7.3)

Administrative Policy

May 2017 CPA Alberta Roundtable, ITA Q.8

due diligence defence to penalty

What factors would influence CRA’s assessment of due diligence, and what support would CRA expect the tax preparer to retain to evidence due diligence? CRA responded:

The assessment will be based on the … legislation, which states that tax preparers who prepare more than 10 returns must file them electronically. Certain restrictions do apply however that may preclude a tax preparer from filing these returns electronically. These restrictions will be considered during assessment. …

Similarly, please consider the due diligence issue where a tax professional has been engaged to prepare a return for a person for whom no one is authorized to sign a T183. Such a circumstance could arise where a return is due for an individual who lacks competency to sign, and over whom no one has Power of Attorney (for example, a child or spouse looking after a parent or spouse’s affairs on an informal basis, or a deceased taxpayer where no Executor or Administrator has been legally appointed).

Subsection 162(10) - Failure to furnish foreign-based information

Administrative Policy

RC4651 “Guidance on Country-By-Country Reporting in Canada” 23 November 2018

Presumption of gross negligence after 2017 filing year

Paragraphs 162(10)(a) and (b) of the Act

The penalty under subsection 162(10) of the Act applies in two mutually exclusive situations described by paragraphs 162(10)(a) and (b).

The first situation arises where a person or partnership, knowingly or under circumstances amount to gross negligence, fails to file an information return as and when required by any of sections 233.1 to 233.4 or section 233.8. Where no demand has been served under section 233 to file the return, the penalty is $500 per month for up to 24 months. It begins to run from the month in which the return was required to be filed.

The second situation arises where a person or partnership required to file a return under any of sections 233.1 to 233.4 or section 233.8 has, knowingly or under circumstances amounting to gross negligence, failed to comply with a demand served under section 233 to file the return. The penalty in this case is $1,000 per month for up to 24 months. It begins to run from the month in which the demand was served.

Given the widespread understanding of CbC reporting requirements by multinationals, any failure to file a CbC report as required under subsection 233.8(3) of the Act will, for the 2018 and subsequent filing years, be presumed to be gross negligence unless special circumstances exist that explain the failure to file.

Procedure for requesting waiver of penalties

Requesting penalty relief

...To make a request, if paper filing the CbC report, attach a note to the cover page requesting relief for late filing penalties under subsection 220(3.1). If electronic filing, put a note in Table 3 clearly outlining the request, the applicable subsection and the reasons for the request.

14 July 2014 Internal T.I. 2014-0537701I7 F - Voluntary disclosure - T1134 and FAPI

s. 162(10) penalty for failure to file T1134s

Representatives of a taxpayer initiated a voluntary disclosure for a taxpayer who had not filed T1134s and who had failed to report foreign accrual property income (or related FAPL or FACL deductions). Without being asked about the penalties that would apply if a disclosure did not meet the requirements of the voluntary disclosure programme, Headquarters noted that a T1134 is required for each foreign affiliate for each post-1995 year, and that a s. 162(7) assessment "must be made by the Minister before the expiration of the normal reassessment period," but referred to the exception for carelessness etc. and the potential three-year extension under s. 152(4)(b)(iii). However, the penalties under ss. 162(10) or (10.1), or s. 163(2.4), which could be engaged only in circumstances of gross negligence etc., generally could be imposed without time limitation.

12 December 2013 Internal T.I. 2013-0497231I7 - Penalties on Foreign Asset Reporting

normal reassessment period does not apply

What are the time limitations for assessing a penalty on foreign asset reporting? After noting that no limitation period for a Part XV information return commences running if the return has not been filed, and that s. 152(4)(a)(i) will apply to permit the assessment of a s. 162(7) penalty beyond the normal reassessment period (or such period as it is to be extended by three years under proposed s. 152(4)(b.2) respecting s. 233.3 returns) if there has been neglect etc., CRA stated:

This penalty is reduced by any penalty to which the person or partnership is liable under subsection 162(7). The subsection 162(10) penalty may be assessed beyond the normal reassessment period because, in order for the penalty to be applicable, the person or partnership must have exceeded the conditions described in subparagraph 152(4)(a)(i).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) S. 152(4)(a) applies to Part XV returns 59
Tax Topics - Income Tax Act - Section 162 - Subsection 162(10.1) normal reassessment period does not apply 52
Tax Topics - Income Tax Act - Section 162 - Subsection 162(7) s. 152(4)(a) applies to Part XV returns 81

Subsection 162(10.1) - Additional penalty

Administrative Policy

16 July 2015 Internal T.I. 2015-0590681I7 - Application of paragraph 162(10.1)(e) penalty

same date must be used for picking maximum amount

Should the computation of the s. 162(10.1)(e) penalty be based on:

  • Option 1: the highest of all amounts each of which is the total costs of all specified foreign property at a certain date (e.g., month end); or
  • Option 2: the total of the highest of the costs of each specified foreign property during the year.

CRA responded:

[W]e agree with Option 1 where the computation of paragraph 162(10.1)(e) penalty is based on the highest of the total costs of all specified foreign property during the year, rather than on the total of the highest cost of each specified foreign property during the year.

…[T]his interpretation is consistent with the definition of "reporting entity" in subsection 233.3(1), which requires a comparison of the total of the cost amounts of all specified foreign property during the year with the $100,000 threshold, rather than the costs of the individual properties at different points in time.

12 December 2013 Internal T.I. 2013-0497231I7 - Penalties on Foreign Asset Reporting

normal reassessment period does not apply

After discussing (above) the s. 162(10) penalty, CRA stated:

This penalty is reduced by the amount of the penalties in subsections 162(7) and (10). As with the subsection 162(10) penalty, this penalty may be assessed beyond the normal reassessment period because the person or the partnership would have exceeded the conditions described in subparagraph 152(4)(a)(i).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) S. 152(4)(a) applies to Part XV returns 59
Tax Topics - Income Tax Act - Section 162 - Subsection 162(10) normal reassessment period does not apply 132
Tax Topics - Income Tax Act - Section 162 - Subsection 162(7) s. 152(4)(a) applies to Part XV returns 81

Subsection 162(11)

Cases

Borealis Geopower Inc. v. The Queen, 2018 TCC 189 (Informal Procedure)

loss carryback did not reduce late-filing penalty or interest

Campbell J found that the taxpayer had received government assistance in its 2014 taxation year, as a result of which its SR&ED expenditures for 2014 were reduced under s. 37(1)(d) for income computation and investment tax credit purposes, with the effect that a late-filing penalty respecting the filing of its return for the 2014 year was increased. The taxpayer then carried back a subsequent year’s non-capital loss. In confirming that such carryback did not reduce the penalty or interest in light inter alia of s. 162(11), Campbell J stated (at paras 32 and 33):

…[T]he Appellant’s tax payable for the purposes of calculating the late filing penalty for the 2014 taxation year cannot take into account either the non-capital loss carryback or ITC carryback. This application of the provisions to the calculation of the penalty in this appeal is supported as well by the jurisprudence (Hazhir Zandi v The Queen, 2012 TCC 259, 2012 DTC 1246). The late filing penalty was correctly calculated by the Minister in accordance with those provisions. The non-capital loss carryback incurred in 2015 cannot be taken into account when considering the Appellant’s tax payable for the 2014 taxation year for the purpose of calculating the late filing penalty amount.

Similarly, pursuant to subsection 161(7)…, carryback deductions used to reduce income tax in a preceding taxation year will not affect the calculation of interest for that year. The Federal Court of Appeal in Connaught Laboratories Ltd. v The Queen, [1994] FCJ No. 1681, 94 DTC 6697, concluded that there was no ambiguity in the wording of subsection 161(7), nor was the provision offensive to the intent and purpose of the Act.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 37 - Subsection 37(1) - Paragraph 37(1)(d) taxpayer had “physically” received unearned government assistance because it had authority to deal with the funds 234
Tax Topics - General Concepts - Payment & Receipt taxpayer had "physically" received govenment assistance funds with freedom to transfer 106