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Canadian Tax Update – Collections, audits, objections and appeals

Author(s): Monica Biringer, Mark Brender, Patrick Marley, Maude Lussier-Bourque, Ilana Ludwin

Mar 24, 2020

Updated June 1, 2020

For further information on the changes below or other tax matters, please contact one of the authors above or any member of our National Tax Group.

The following is a summary of the relief measures regarding collections, audits, objections and appeals recently announced by the Canada Revenue Agency (CRA). These measures are intended to relieve some of the financial distress and uncertainties currently experienced by businesses and individuals resulting from the COVID-19 pandemic.

Collections

The CRA announced that collections activities on new debts will be suspended until further notice, and flexible payment arrangements will be available.

With respect to pre-existing situations, they will be addressed on a case-by-case basis to prevent financial hardship. Payment arrangements are also available on a case-by-case basis if a taxpayer cannot meet its tax payment obligations.

The CRA also advised that taxpayers can submit a request to cancel penalties and interest if they are prevented from complying with a tax obligation (such as making a payment or filing a return in due course) because of circumstances beyond their control. Please do not hesitate to reach out to us if you are interested in submitting a request.

Audits

As addressed in our Osler Tax Update Important Canadian tax updates – Filings and disputes published on March 18, 2020, the CRA announced that it will not contact taxpayers to initiate any new audits.

The CRA clarified that it will temporarily suspend interactions with taxpayers and representatives for audits already in progress for the vast majority of taxpayers. Interactions with taxpayers will be limited to situations where the legal deadline to reassess a tax return is approaching, and in cases of high-risk GST/HST refund claims that require some contact before they can be paid out.

On March 27, 2020, the Government of Canada specified that, with certain exceptions, no requests for information related to existing audits should be issued to taxpayers. Moreover, the Government of Canada held that the CRA should finalize audits and issue reassessments only in exceptional circumstances (e.g. cases with a significant compliance issue, cases where the taxpayer requests an adjustment or cases where taxation years will become statute-barred or treaty-barred).

On May 28, 2020, the CRA announced that it will resume audit activities by prioritizing actions that are beneficial to the taxpayer or where taxpayers have indicated there is an urgency to advancing their audit. In respect to this resumption, the CRA announced that it will first focus on higher dollar audits, audits close to completion, and those with a strategic importance to the Government of Canada, provinces and territories, or tax treaty partners. Moreover, the CRA is advancing its efforts to combat suspected fraud and other criminal activity.

The CRA also announced on May 28, 2020 that it will be adapting its practices to reflect the health and economic impacts of COVID-19. The example given in the announcement is the possibility of sending information to the CRA via e-mail, which generally was not previously allowed. The CRA indicated that another change will relate to offering additional time and upfront consultation on requests to provide the CRA with information and access.

The CRA announced on April 17, 2020 that generally, taxpayers who received a requirement for information are not required to respond to the requirement until further notice. The CRA will contact taxpayers with a new due date in cases where the information is still needed. On May 28, 2020, the CRA announced that it will review the requirements for information sent prior to March 16 and due after that date. In cases where the CRA still wishes to obtain the information in the requirement for information, it will contact taxpayers and third parties, including financial institutions.

In respect of transfer pricing audits, requests for contemporaneous documentation made prior to April 1, 2020 that were originally due on March 18, 2020 or later are considered cancelled. The CRA indicated that these requests will be re-issued at a later date, at which time the taxpayer will have the maximum amount of time of 3 months to submit the documentation.

In respect of Scientific Research and Experimental Development (SR&ED) audits, the CRA announced that no new reviews or audits will be started. Further, the CRA announced that existing reviews and audits will be completed as soon as possible in order to issue credits faster to businesses.

The CRA further announced that most refundable claims will be processed to ensure claimants receive the credits to which they are entitled as soon as possible with minimal burden on the claimants. However, the CRA indicated that these accepted claims may be subject to review and audit at a future date to ensure that the claimant was eligible for the credits.

Objections and Appeals

On March 27, 2020, the Government of Canada announced that the deadline for any objection originally due between March 18, 2020 and June 30, 2020 is now June 30, 2020.

The CRA indicated that objections related to entitlement to benefits and credits have been identified as a critical service and, as a result, taxpayers should not expect any delays associated with the processing of these objections.

With respect to objections related to other tax matters filed by individuals and businesses, the CRA is currently holding these accounts in abeyance and no collection actions should be taken with respect to these objections during this period.

With respect to appeals before the Tax Court of Canada, please refer to our related Osler Tax Update Tax Court of Canada closure.

Information published by the CRA, the Department of Finance and the Tax Court of Canada regarding the above can be found at the following links:

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