Section 67.6

See Also

Chow v. The Queen, 2011 DTC 1196 [at 1088], 2011 TCC 263

V.A. Miller J. found (at para. 27) that the seizure of approximately $110,000 of proceeds of drug trafficking at the taxpayer's apartment did not give rise to a deductible business expense, as the deduction was prohibited under s. 67.6. She also found (at para. 27) that the amount would not have been deductible in any case, reiterating her position in Anjara that forfeitures are not normally incurred to gain or produce income.

Administrative Policy

S4-F2-C1 - Deductibility of Fines and Penalties

1.5 A person or public body may include, for example, a government or government agency, regulatory authority, court, tribunal or authorized representatives of such bodies. Section 67.6 will apply where such persons or public bodies are authorized to levy the fine or penalty that is imposed under a federal, provincial, municipal or foreign law.

1.6 …[T]he only prescribed fine or penalty…is a penalty imposed under paragraph 110.1(1)(a) of the Excise Act.

1.7 Section 67.6 also does not prohibit the deduction of:

  • penalties or damages paid under a private contract (for example, a penalty charged for late performance);
  • interest charges, including interest arising on fines or penalties. …;
  • amounts not characterized as a fine or penalty under the legislation imposing the particular amount

Example 2

…In order to comply with its prescribed emission limit for a particular year, X Corp. purchases carbon offset credits. Such credits are purchased as a compliance measure and are not considered a penalty under the relevant provincial climate change legislation. Accordingly, section 67.6 does not prevent X Corp. from deducting the credits purchased.

The following year, X. Corp exceeds its prescribed emission limit… . Any amount payable under the provincial climate change legislation that is described as a fine or penalty as a consequence of the non-compliance will be precluded from deduction by section 67.6.

1.20 If a fine or penalty is incurred in connection with the acquisition of an asset for which capital cost allowance (CCA) may be claimed, the fine or penalty may be included in the capital cost of that asset (or the CCA class to which the asset belongs). If a fine or penalty is incurred in connection with the acquisition or production of inventory, the fine or penalty is included in the cost of inventory.

1.21 If a fine or penalty is incurred in connection with the acquisition of an eligible capital property, the fine or penalty is an eligible capital expenditure provided all the other tests in the subsection 14(5) definition of eligible capital expenditure are met.

1.27 Section 67.6 prohibits the deduction of a fine or penalty imposed under a foreign statute... .

1.29 Fines or penalties levied as a result of a criminal conviction may be precluded from deduction by section 67.6… .

10 July 2012 External T.I. 2012-0404711E5 -

administrative penalties imposed under Alberta's Climate Change and Emissions Management Act, which can only be settled in cash, are not deductible in computing income by virtue of s. 67.6.