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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 April 22, 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 Canada Revenue Agency 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 Canada Revenue Agency 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 Canada Revenue Agency announced that it will not contact taxpayers to initiate any new audits.

The Canada Revenue Agency 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 Canada Revenue Agency 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).

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.

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 Canada Revenue Agency 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 Canada Revenue Agency 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, by orders of the Chief Justice dated March 16, 2020, March 23, 2020 and April 17, 2020, the Court will be closed until May 29, 2020 and the period beginning on March 16, 2020 and ending on the day that is 60 days after the Court and its offices reopen for the transaction of business, will be excluded from the computation of all deadlines prescribed by the rules of the Court and any orders or directions of the Court that were issued prior to March 16, 2020. This period may be further modified.

Deadlines to file notices of appeal and other statutory deadlines that are not prescribed by the Court’s rules remain unaltered. The April 17, 2020 order provides that all notices of appeal filed during the period beginning March 16, 2020 and ending on the day that is 60 days after the Court and its offices reopen will be treated as if they include an Application for Extension of Time to Appeal brought on the exceptional grounds that the COVID-19 pandemic and the closure of the Court’s Registry prevented the timely filing of the notice of appeal. In a Notice to the Public and the Profession dated April 17, 2020, the Chief Justice noted that parties can still file documents subject to statutory deadlines online or by facsimile, and requested that parties wait to file all other documents and requests until the Court reopens.

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

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