Application of Penalties and Interest when a Return and/or Rebate Application, and/or Another Return, is Received after the Due Date
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Application of Penalties and Interest when a Return and/or Rebate Application, and/or Another Return, is Received after the Due Date
GST/HST Policy Statement P-194R2
Date of issue: August 27, 2007
Legislative reference: Subsections 228(6), 228(7), 278.1(3), 280(1), sections 280.1 and 334 of the Excise Tax Act
National coding system file number(s): 11675-1
Effective date: January 1, 1991 for GST, and April 1, 1997 for HST
April 1, 2007 for application of penalty under section 280.1 and the cancellation of the 6% penalty under subsection 280(1)
Note: This policy statement supersedes P-194R dated July 20, 1999.
Please note that the following policy statement, although correct at the time of issue, may not have been updated to reflect any subsequent legislative changes.
Issue
When a person files a return reporting net tax remittable or tax payable (the "remittance amount"), and the person claims a refund or rebate payable to that person at that time in the particular return and/or in an application filed with the particular return, and/or in another return, subsection 228(6) of the Excise Tax Act (the Act) provides that the credit amount used to offset the remittance amount is deemed at that time to have been remitted by the person and paid by the Minister to the person.
Subsection 228(7) of the Act provides under certain circumstances that the tax remittable or payable by a person may also be offset by a refund or rebate to which a closely related person may be entitled.
A return or rebate application sent by first class mail or its equivalent is deemed by subsection 334(1) of the Act to have been received, and therefore filed, on the day it was mailed. As a result, the net tax remittance that is offset by an amount of the refund or rebate under subsection 228(6) or subsection 228(7) of the Act is considered to have been remitted to the Receiver General on that day. (Note: Generally, in the absence of any other evidence, the day a return or rebate application is postmarked by the post office will be considered as the day the return or rebate application was mailed.)
However, in the case of electronic filing, it is deemed to be a return in the prescribed form, in accordance with subsection 278.1(3) of the Act, filed only on the day in which the Minister acknowledges acceptance of it.
Subsection 334(2) of the Act provides that an amount that is required to be paid or remitted under Part IX of the Act is not considered as having been paid or remitted until the day it is actually received by the Receiver General. A remittance for any amount remaining due after a rebate or refund is applied against the remittance amount under subsection 228(6) or subsection 228(7) of the Act will therefore only be considered to have been remitted on the day it is actually received.
Under subsection 280(1), an amount owing under the Act before April 1, 2007 is subject to a 6% penalty and a prescribed interest rate ( “the 6% penalty and interest”), computed the day following the day the amount was due and ending on the day the amount is remitted or paid. The interest rate is prescribed by the Interest Rate (Excise Tax Act) Regulations and is determined by reference to the rate charged on 90-day Treasury Bills and is adjusted quarterly.
Effective April 1, 2007, the 6% penalty is cancelled. Instead, a new rate of interest (“the newly prescribed interest”) applies to an amount owing. The Interest Rate (Excise Tax Act) Regulations will be amended so that the newly prescribed interest rate charged on an amount owing will be the basic rate, plus 4%. "Basic rate" will be defined in the regulations and will be based on the rate charged on 90-day Treasury Bills, adjusted quarterly, and rounded up to the nearest whole percentage (expressed as a percentage per year).
New section 280.1 of the Act imposes a penalty (a “failure to file penalty”) for a GST/HST return filed late with an unremitted or unpaid amount. This penalty imposes
(a) a 1% penalty on the amount outstanding on the return, plus
(b) a penalty of one-quarter of the amount calculated under paragraph (a) times the number of months the return was overdue, to a maximum of 12 months.
This penalty is imposed on:
- any return that is required to be filed on or after April 1, 2007, and
- any return that is required to be filed before April 1, 2007 and that is not filed by March 31, 2007. In this case, the day on or before which the return is required to be filed is deemed to be March 31, 2007, but only for the purposes of calculating this penalty.
Decision
When returns are filed
A return filed after its due date but before April 1, 2007
Where the return showing an outstanding remittance amount is filed after the due date, but before April 1, 2007, the 6% penalty and interest will apply on the remittance amount even where the return was accompanied by a rebate application or credit return. Penalty and interest will apply beginning the day after the remittance amount became due and ending on the day it is deemed to be remitted to the Receiver General by applying the amount of the rebate and/or refund against that remittance amount (i.e., the day the return and accompanying application and/or return are mailed). The 6% penalty and interest will continue to apply on any amount remaining outstanding after the rebate and/or refund is applied and ending the day the remittance for the amount accompanying the return is actually received, or March 31, 2007, whichever date is earlier. Beginning April 1, 2007, the newly prescribed interest will apply to the outstanding remittance amount ending the day the remittance amount is paid.
Where the return showing an outstanding remittance amount is accompanied with a rebate application or credit return and is mailed (i.e., filed) prior to the due date but received by the Receiver General after the due date, but before April 1, 2007, the 6% penalty and interest will not apply on the remittance amount if it is completely offset by the amount of the rebate and/or refund. However, the 6% penalty and interest will apply on any amount remaining outstanding after the offset has been made beginning the day after the amount became due and ending the day on which the remittance for the amount accompanying the return is actually received, or March 31, 2007, whichever date is earlier. The newly prescribed interest will apply to any remittance amount still outstanding on April 1, 2007, and end the day the remittance amount is paid.
A return due after March 31, 2007 filed after its due date
Where the return showing an outstanding remittance amount is due after March 31, 2007, and the return is filed after its due date, the return will be subject to the failure to file penalty, even where the return is accompanied by a rebate application or credit return. The newly prescribed interest will also apply on the remittance amount beginning the day after the remittance amount became due and ending the day it is deemed to be remitted to the Receiver General by applying the amount of the rebate and/or refund against that remittance amount (i.e., the day the return and accompanying application and/or return are mailed). The newly prescribed interest will continue to apply on any amount remaining outstanding after the rebate and/or refund is applied and end the day this amount is remitted. As well, this interest will accrue on the failure to file penalty until the day the penalty is paid.
A return due after March 31, 2007 filed before its due date
Where the return showing an outstanding remittance amount is accompanied with a rebate application or credit return and is mailed (i.e., filed) prior to the due date but received by the Receiver General after the due date, the newly prescribed interest will not apply on the remittance amount if it is completely offset by the amount of the rebate and/or refund. This interest will apply, however, on any amount remaining outstanding after the offset has been made beginning the day after the amount became due and ending the day on which the outstanding remittance is actually received. Since the return is mailed prior to its due date, it is not subject to the failure to file penalty.
A return due before April 1, 2007 filed after March 31, 2007
Where the return showing an outstanding remittance amount is due before April 1, 2007, and the return is filed after March 31, 2007, the return will be subject to the failure to file penalty, even where the return is accompanied by a rebate application or credit return. The 6% penalty and interest apply to the outstanding remittance amount beginning the day after the remittance was due and ending on March 31, 2007. The newly prescribed interest will apply on the remittance amount beginning April 1, 2007, and ending the day the remittance amount is deemed to be remitted to the Receiver General by applying the amount of the rebate and/or refund against that remittance amount (i.e., the day the return and accompanying application and/or return are mailed). The newly prescribed interest will continue to apply on any amount remaining outstanding after the rebate and/or refund is applied and end on the day this amount is remitted. As well, the the failure to file penalty will be subject to the newly prescribed interest beginning April 2, 2007, and ending on the day the penalty is paid.
Mandatory bank remitting
A return and accompanying remittance or any other GST/HST payment are usually accepted at financial institutions. However, the return for which an offset is requested and/or the accompanying rebate application, and/or credit return, cannot be presented to a financial institution but must be filed together directly with the Receiver General. This may be done either by mailing all returns and rebate applications together to the address shown on the return, allowing for the time required to deliver the return where a payment must be made, or by taking them to any Canada Revenue Agency office. If a remittance amount of $50,000 or more remains after taking into account a requested offset, this remaining amount must be remitted at a financial institution.
Offsetting of tax by the rebate or refund of another person
Members of a group of closely related corporations wishing to offset an amount remittable by the rebate or refund of another member under subsection 228(7) of the Act should consult the instructions contained within the two part form GST303, Application to Offset Taxes by Refunds or Rebates and the accompanying regulations for the prescribed conditions.
Cancellation or waiver of penalties and interest
The application of penalties and interest in accordance with this policy is subject to CRA taxpayer relief guidelines which have been established to provide for the cancellation or waiver of penalties and interest where a person has been prevented from complying with a GST/HST obligation due to an extraordinary circumstance beyond the person's control.
Examples
The following examples discuss the application of penalties and interest when a return, and/or rebate application, and/or another return, is received after the due date.
- Examples 1 to 4: A return filed after its due date but before April 1, 2007
- Examples 5 to 8: A return due after March 31, 2007, filed after the due date
- Examples 9 to 10: A return due before April 1, 2007, filed after March 31, 2007
Example No. 1 – A return filed after its due date but before April 1, 2007
Facts
1. A return for a reporting period is due January 31, 2007. The positive amount of net tax to be remitted of $10,000 as reported on that return is offset by an accompanying rebate application for $20,000.
2. The return and accompanying rebate application are mailed to the Summerside Tax Centre (STC) on January 29, 2007, and received at the STC on February 2, 2007.
Decision
1. Based on the facts set out above, the return and accompanying rebate application are deemed to have been received, and therefore filed, on January 29, 2007.
2. The net tax remittable to the Receiver General of $10,000 is considered to have been remitted on January 29, 2007.
3. The 6% penalty and interest do not apply.
Rationale
Pursuant to subsection 334(1) of the Act, the return and accompanying rebate application are deemed to have been received, and therefore filed, on the day they were mailed, i.e., January 29, 2007. As such, the net tax remittable of $10,000 is deemed to have been remitted to the Receiver General on January 29, i.e., prior to the due date of January 31, by the offset of $10,000 of the $20,000 rebate. As the remittance amount is completely offset by the amount of the rebate, and received prior to the due date of January 31, the 6% penalty and interest do not apply because the amount of net tax remittable is deemed to have been remitted on or before the due date of January 31.
Example No. 2 – A return filed after its due date but before April 1, 2007
Facts
1. A return for a reporting period is due January 31, 2007. The positive amount of net tax to be remitted of $10,000 as reported on that return is offset by an accompanying rebate application for $20,000.
2. The return and accompanying rebate application are mailed to the Summerside Tax Centre (STC) on February 5, 2007, and received at the STC on February 9, 2007.
Decision
1. Based on the facts set out above, the return and accompanying rebate application are deemed to have been received, and therefore filed, on February 5, 2007.
2. The net tax remittable to the Receiver General of $10,000 is considered to have been remitted on February 5, 2007.
3. The 6% penalty and interest apply to the $10,000 net tax remittable beginning February 1, and ending February 5, 2007.
Rationale
Pursuant to subsection 334(1) of the Act, the return and accompanying rebate application are deemed to have been received, and therefore filed, on the day they were mailed, i.e., February 5, 2007. As such, the net tax remittable of $10,000 is considered to have been remitted to the Receiver General on February 5, i.e., after the due date of January 31, by the offset of $10,000 of the $20,000 rebate. As the amount of net tax is considered to have been remitted on February 5, penalty and interest will be applied on the $10,000 of outstanding net tax from January 31, beginning February 1 and ending the day it was remitted, February 5.
Example No. 3 – A return filed after its due date but before April 1, 2007
Facts
1. A return for a reporting period is due January 31, 2007. The positive amount of net tax to be remitted of $10,000 as reported on that return is offset by an accompanying rebate application for $2,500.
2. The return and accompanying rebate application are mailed to the Summerside Tax Centre (STC) on January 29, 2007, and received at the STC on February 2, 2007. The return is accompanied by a cheque for $7,500 (dated January 29, 2007).
Decision
1. Based on the facts set out above, the return and accompanying rebate application are deemed to have been received, and therefore filed, on January 29, 2007.
2. Net tax remittable of $2,500 is considered to have been remitted to the Receiver General on January 29, 2007 and the remaining $7,500 of net tax remittable is considered to have been remitted on February 2, 2007.
3. The 6% penalty and interest apply to the net tax remittable of $7,500, beginning February 1, and ending February 2, 2007.
Rationale
Pursuant to subsection 334(1) of the Act, the return and accompanying rebate application are deemed to have been received, and therefore filed, on January 29, 2007. As such, $2,500 of the net tax remittable is deemed to have been remitted to the Receiver General on January 29, by the offset of the rebate. However, pursuant to subsection 334(2) of the Act, the remaining $7,500 of net tax is considered to have been remitted on February 2 (the date the cheque was received at the STC) on account of the net tax remittable. The 6% penalty and interest will not apply to $2,500 of the net tax remittable as it was deemed to have been remitted on or before January 31, but penalty and interest will apply to the remaining $7,500 of net tax remittable outstanding from January 31, beginning February 1, 2007 and ending the day it was remitted, February 2.
Example No. 4 – A return filed after its due date but before April 1, 2007
Facts
1. A return for a reporting period is due January 31, 2007. The positive amount of net tax to be remitted of $10,000 as reported on that return is offset by an accompanying rebate application for $2,500.
2. The return and accompanying rebate application are mailed to the Summerside Tax Centre (STC) on February 5, 2007, and received at the STC on February 9. The return is accompanied by a cheque for $7,500 (dated January 31, 2007).
Decision
1. Based on the facts set out above, the return and rebate application are deemed to have been received, and therefore filed, on February 5, 2007.
2. Net tax remittable of $2,500 is deemed to have been remitted to the Receiver General on February 5, 2007, by the offset of the rebate, and the remaining $7,500 net tax is considered to have been remitted on February 9, 2007.
3. The 6% penalty and interest apply to the $10,000 net tax remittable from February 1 to 5, 2007, then on the remaining $7,500 net tax until remitted on February 9, 2007.
Rationale
Pursuant to subsection 334(1) of the Act, the return and the rebate application are deemed to have been received, and therefore filed, on February 5, 2007. As such, $2,500 of the net tax remittable is deemed to have been remitted to the Receiver General on February 5, by the offset of the rebate and pursuant to subsection 334(2) of the Act, the remaining $7,500 net tax is considered to have been remitted on February 9 (the date the cheque was received at the STC). The 6% penalty and interest will apply to the $10,000 of net tax from January 31, beginning February 1, and ending the day the $2,500 was remitted, February 5. This penalty and interest continue to apply on the $7,500 net tax remaining outstanding until it is remitted on February 9.
Example No. 5 – A return due after March 31, 2007, filed after the due date
Facts
1. A return for a reporting period is due April 30, 2007. The positive amount of net tax to be remitted of $10,000 as reported on that return is offset by an accompanying rebate application for $20,000.
2. The return and accompanying rebate application are mailed to the Summerside Tax Centre (STC) on April 27, 2007, and received at the STC on May 3, 2007.
Decision
1. Based on the facts set out above, the return and accompanying rebate application are deemed to have been received, and therefore filed, on April 27, 2007.
2. The net tax remittable to the Receiver General of $10,000 is considered to have been remitted on April 27, 2007.
3. The failure to file penalty and the newly prescribed interest do not apply.
Rationale
Pursuant to subsection 334(1) of the Act, the return and accompanying rebate application are deemed to have been received, and therefore filed, on the day they were mailed, i.e. April 27, 2007. As such, the net tax remittable of $10,000 is deemed to have been remitted to the Receiver General on April 27, i.e., prior to the due date of April 30, by the offset of $10,000 of the $20,000 rebate amount. As the return is received prior to its due date, the failure to file penalty does not apply. As the remittance amount is completely offset by the amount of the rebate, and received prior to the due date of April 30, the newly prescribed interest does not apply because the amount of net tax remittable is deemed to have been remitted on or before the due date of April 30.
Example No. 6 – A return due after March 31, 2007, filed after the due date
Facts
1. A return for a reporting period is due April 30, 2007. The positive amount of net tax to be remitted of $10,000 as reported on that return is offset by an accompanying rebate application for $20,000.
2. The return and accompanying rebate application are mailed to the Summerside Tax Centre (STC) on May 3, 2007,and received at the STC on May 9, 2007.
Decision
1. Based on the facts set out above, the return and accompanying rebate application are deemed to have been received, and therefore filed, on May 3, 2007.
2. The net tax remittable to the Receiver General of $10,000 is considered to have been remitted on May 3, 2007.
3. A failure to file penalty of $100 applies.
4. The newly prescribed interest applies to the $10,000 net tax from May 1 to 3, 2007, and on the $100 failure to file penalty from May 1, until the penalty is paid.
Rationale
Pursuant to subsection 334(1) of the Act, the return and accompanying rebate application are deemed to have been received, and therefore filed, on the day they were mailed, i.e., May 3, 2007. As such, the net tax remittable of $10,000 is considered to have been remitted to the Receiver General on May 3, i.e., after the due date of April 30, by the offset of $10,000 of the $20,000 rebate. Since the return was filed after its due date of April 30, with an amount outstanding on that date of $10,000, a failure to file penalty of $100 will be charged (1% of $10,000). As the amount of net tax is considered to have been remitted on May 3, the newly prescribed interest will apply on the $10,000 of outstanding net tax from April 30, beginning May 1 and end the day it is remitted, May 3. This interest will also apply on the $100 failure to file penalty, beginning May 1, and ending the day the penalty is paid.
Example No. 7 – A return due after March 31, 2007, filed after the due date
Facts
1. A return for a reporting period is due April 30, 2007. The positive amount of net tax to be remitted of $10,000 as reported on that return is offset by an accompanying rebate application for $2,500.
2. The return and accompanying rebate application are mailed to the Summerside Tax Centre (STC) on April 27, 2007, and received at the STC on May 3, 2007. The return is accompanied by a cheque for $7,500 (dated April 27, 2007).
Decision
1. Based on the facts set out above, the return and accompanying rebate application are deemed to have been received, and therefore filed, on April 27, 2007.
2. Net tax remittable of $2,500 is considered to have been remitted to the Receiver General on April 27, 2007 and the remaining $7,500 of net tax remittable is considered to have been remitted on May 3, 2007.
3. The failure to file penalty does not apply.
4. The newly prescribed interest applies to the $7,500 net tax remittable beginning May 1, and ending May 3, 2007.
Rationale
Pursuant to subsection 334(1) of the Act, the return and accompanying rebate application are deemed to have been received, and therefore filed, on April 27, 2007. As such, $2,500 of the net tax remittable is deemed to have been remitted to the Receiver General on April 27, by the offset of the rebate. However, pursuant to subsection 334(2) of the Act, the remaining $7,500 of net tax is considered to have been remitted on May 3, (the date the cheque was received at the STC). Since the return was filed before its due date of April 30, the failure to file penalty does not apply. The newly prescribed interest does not apply to $2,500 of the net tax remittable as it was deemed to have been remitted on or before the due date of April 30. However, this interest applies to the remaining $7,500 net tax remittable outstanding from April 30, beginning May 1, and ending the day it was remitted, May 3.
Example No. 8 – A return due after March 31, 2007, filed after the due date
Facts
1. A return for a reporting period is due April 30, 2007. The positive amount of net tax to be remitted of $10,000 as reported on that return is offset by an accompanying rebate application for $2,500.
2. The return and accompanying rebate application are mailed to the Summerside Tax Centre (STC) on May 3, 2007, and received at the STC on May 9, 2007. The return is accompanied by a cheque for $7,500 (dated April 30, 2007).
Decision
1. Based on the facts set out above, the return and rebate application are deemed to have been received, and therefore filed, on May 3, 2007.
2. Net tax remittable of $2,500 is deemed to have been remitted to the Receiver General on May 3, 2007, and the remaining $7,500 of net tax is considered to have been remitted on May 9, 2007.
3. A failure to file penalty of $100 applies.
4. The newly prescribed interest applies to the $10,000 net tax remittable, beginning May 1, and ending May 3, then on the $7,500 net tax remittable ending May 9, 2007, and on the $100 failure to file penalty, beginning May 1 and ending the day the penalty is paid.
Rationale
Pursuant to subsection 334(1) of the Act, the return and the application are deemed to have been received, and therefore filed, on May 3, 2007. As such, $2,500 of the net tax remittable is deemed to have been remitted to the Receiver General on May 3, by the offset of the rebate, and pursuant to subsection 334(2) of the Act, the remaining $7,500 of net tax is considered to have been remitted on May 9 (the date the cheque was received at the STC). Since the return was filed late with a $10,000 net tax remittance outstanding, a $100 failure to file penalty (1% of $10,000) applies to this return. The newly prescribed interest applies to the $10,000 of net tax outstanding from April 30, beginning May 1 and ending the day the $2,500 was remitted, May 3. This interest continues to apply to the $7,500 remaining outstanding until it is remitted on May 9, and to the $100 failure to file penalty, beginning May 1, and ending the day the penalty is paid.
Example No. 9 – A return due before April 1, 2007, filed after March 31, 2007
Facts
1. A return for a reporting period is due January 31, 2007. The positive amount of net tax to be remitted of $10,000 as reported on that return is offset by an accompanying rebate application for $20,000.
2. The return and accompanying rebate application are mailed to the Summerside Tax Centre (STC) on April 16, 2007, and received at the STC on April 20, 2007.
Decision
1. Based on the facts set out above, the return and accompanying rebate application are deemed to have been received, and therefore filed, on April 16, 2007.
2. The net tax remittable of $10,000 is considered to have been remitted to the Receiver General on April 16, 2007.
3. The 6% penalty and interest apply to the $10,000 net tax beginning February 1, 2007 and ending March 31, 2007.
4. A failure to file penalty of $100 applies.
5. The newly prescribed interest applies to the $10,000 net tax beginning April 1, 2007 ending April 16, 2007, and to the failure to file penalty of $100, beginning April 1, 2006 and ending the day the penalty is paid.
Rationale
Pursuant to subsection 334(1) of the Act, the return and accompanying rebate application are deemed to have been received, and therefore filed, on the day they were mailed, i.e., April 16, 2007. As the amount of net tax is considered to have been remitted on April 16, the 6% penalty and interest apply on the $10,000 of outstanding net tax from January 31, beginning February 1, and ending March 31. Since the return is filed late with an outstanding net tax of $10,000, the return is subject to a failure to file penalty of $100 (1% × $10,000). The net tax remittable of $10,000 is considered to have been remitted to the Receiver General on April 16, i.e., after the due date of January 31, by the offset of $10,000 of the $20,000 rebate amount. The newly prescribed interest applies to the $10,000 outstanding net tax beginning April 1 and ending April 16, and to the $100 failure to file penalty, beginning April 2 and ending the day the penalty is paid.
Example No. 10 – A return due before April 1, 2007, filed after March 31, 2007
Facts
1. A return for a reporting period is due January 31, 2007. The positive amount of net tax to be remitted of $10,000 as reported on that return is offset by an accompanying rebate application for $2,500.
2. The return and accompanying rebate application are mailed to the Summerside Tax Centre (STC) on May 3, 2007, and received at the STC on May 9. The return is accompanied by a cheque for $7,500 (dated May 3).
Decision
1. Based on the facts set out above, the return and accompanying rebate application are deemed to have been received, and therefore filed, on May 3, 2007.
2. Net tax remittable of $2,500 is considered to have been remitted to the Receiver General on May 3, 2007, and the remaining $7,500 of net tax remittable is considered to have been remitted on May 9, 2007.
3. The 6% penalty and interest apply to the $10,000 net tax remittable beginning February 1, 2007 and ending March 31, 2007.
4. A failure to file penalty in the amount of $125 applies.
5. The newly prescribed interest applies on the $10,000 net tax remittable beginning April 1, 2007 and ending May 3, 2007. It will also apply on the $7,500 net tax remittable ending May 9, and on the $125 failure to file penalty beginning April 2, 2007 and ending the day the penalty is paid.
Rationale
Pursuant to subsection 334(1) of the Act, the return and accompanying rebate application are deemed to have been received, and therefore filed, on May 3, 2007. As such, $2,500 of the net tax remittable is deemed to have been remitted to the Receiver General on May 3, by the offset of the rebate amount. However, pursuant to subsection 334(2) of the Act, the remaining $7,500 of net tax is considered to have been remitted on May 9 (the date the cheque was received at the STC). The net tax remittance of $10,000 due January 31 is subject to the 6% penalty and interest, beginning February 1 and ending March 31. Since the return was filed late, with net tax outstanding of $10,000, a failure to file penalty of $125 applies [(1% × $10,000) + (25% × $100 for the month of April)]. Beginning April 1, 2007, the newly prescribed interest applies to the $10,000 outstanding net tax until May 3 ( the day $2,500 of the rebate amount is deemed to have been remitted on account of the net tax remittable). The newly prescribed interest continues to apply to the remaining $7,500 of net tax until it is remitted on May 9, the date the cheque was received at the STC. This interest also applies to the $125 failure to file penalty, beginning April 2, and ending the day the penalty is paid.
- Date modified:
- 2017-06-22