Administration

by Jeff Kirshen

An Update to the Non-Resident Speculation Tax

We previously wrote about the Non-Resident Speculation Tax (NRST), explaining what it is, what it is applied to, and any refunds or rebates that may be available. In short, the NRST is the addition of extra taxation to the purchases of real property by foreign nationals.

 

Updates to the Non-Resident Speculation Tax

As of March 30, 2022, the Non-Resident Speculation Tax rate was increased to 20 percent and expanded province-wide. As a result, the NRST may apply on the purchase or acquisition of an interest in residential property located anywhere in Ontario by individuals who are foreign nationals or by foreign corporations or taxable trustees.

The NRST applies to:

• A semi-detached house;
• A detached house;
• Condominium unit;
• Townhouse; and
• Duplexes, triplexes, fourplexes, fiveplexes, sixplexes.

However, the NRST does not apply to land which contains rental multi-residential apartments buildings, commercial land, agricultural land, and industrial land.

The NRST applies to the value of the consideration of the residential property, meaning the purchase price of the transactions. For more information, visit the Ontario Government website.

 

Exemptions from the Non-Resident Speculation Tax

An exemption from NRST may be available in these situations:

• If the foreign national’s spouse is a permanent resident of Canada, he or she can jointly purchase a residence with the spouse. The spouse can also be a nominee or protected person.
• A nominated foreign national under the Ontario Immigrant Nominee Program at the time of purchase can be exempted from the NRST. In this case, the foreign national has certified they will apply or have already applied to become a permanent resident of Canada.
• A protected person can be exempted. A protected person refers to a foreign national who has refugee protection at the time of purchase.

To qualify for an exemption, the foreign national (and if applicable their spouse) must certify they will occupy the property as their principal residence.

The exemption applies if the Canadian citizen, permanent resident of Canada, nominee or protected person and his or her foreign national spouse purchased the property with other individuals who are Canadian citizens, permanent residents of Canada, nominees, or protected persons.

All transferees in the conveyance must also certify that they will occupy the property as their principal residence.

However, keep in mind that the exemption does not apply if the Canadian citizen, permanent resident of Canada, nominee, or protected person and his or her foreign national spouse purchased the property with another foreign national who is not a nominee or protected person.

 

Rebates available for the Non-Resident Speculation Tax

A rebate of NRST may be available for a foreign national who becomes a permanent resident of Canada. To qualify for this rebate, the foreign national must have paid the NRST and:

• become a permanent resident of Canada within four years from the date of the purchase or acquisition,
• hold the property alone or with their spouse (as defined above) only, and
• occupy the property, along with their spouse, if applicable, as their principal residence for the duration of the period that begins within 60 days after the date of purchase and ends when they make an application for the rebate or the rebate conditions have been met, whichever is later.

If the two named transferees are spouses of one another, only one of the spouses must become a permanent resident of Canada for the rebate to apply.

The rebate will not apply if a taxable trustee is a transferee in the conveyance of land.

All rebate applications must be made using the Ontario Land Transfer Tax Refund/Rebate form for NRST.

Supporting documentation will be required to substantiate all applications for rebate.

 

If you are required to pay NRST, or you’re unsure, we can help! Also, if you’re looking to apply for a rebate from the NRST, then call us today to learn more!

 

*Disclaimer

This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions you should consult a lawyer.

by Jeff Kirshen

The Tax Court of Canada – What is a Notice of Appeal?

When a Taxpayer files their income tax return, the Canada Revenue Agency (the “CRA”) review the returns and issues a Notice of Assessment. The CRA may reassess your returns and issue a Notice of Reassessment. If you disagree with your Notice of Assessment, or Reassessment, you have the option to object to it.

A Notice of Objection can be filed 90 days from the date of the Notice of Reassessment. The CRA appeals division will notify you when your objection has been received and an appeals officer will review your objection. Once your objection has been reviewed, the CRA appeals branch will contact you to either confirm that your objection is valid, to change the Notice of Assessment or Reassessment, or confirm the original assessment or reassessment. If you disagree with the decision, you have the option to file a Notice of Appeal.

Essentially, a Notice of Appeal is a document challenging the CRA decision in court. A taxpayer has 90 days from the date stamped on the response to their objection to file a Notice of Appeal with the Tax Court of Canada. However, it is possible to extend the deadline.

 

What is a Notice of Appeal?

The Notice of Appeal is an essential document required to begin an appeal against the CRA’s assessment or reassessment. The Notice of Appeal is an extremely detailed document that contains a great deal of parts, such as:

• The date of the notice;
• The individual’s home address or the Corporation’s principal place of business in the province in which the appeal is being sought;
• The (re)assessment(s) under appeal, including the date of the assessment(s) and the taxation years. If the appeal is under the Excise Tax Act, it must also contain the periods under appeal;
• Provide a detailed description of the facts relied on;
• Specify the legal issues at stake;
• Reference the specific statutory provisions relied upon;
• Detail the reasons the appellant intends to rely on; and
• Indicate the specific relief that is sought.

The Notice of Appeal requires significant time and attention to produce. It requires a large amount of time for lawyers to analyze the facts, interpreting the situation in a favourable manner to support your position. The more detail  you are able to provide, the greater the likelihood of your appeal being successful. Furthermore, the lawyer must spend significant time studying the statutory provisions relied upon and ensuring that a proper remedy is available.

Any errors made on the Notice of Appeal may be fatal, as it can greatly affect your chance for a successful appeal. Not only will it hurt your case moving forward, but amendments to your Notice of Appeal can cause the courts to doubt your version of the facts, which greatly weakens your case.

The Notice of Appeal is the first step of the appeals process that will end up in the Tax Court of Canada. The CRA and the Department of Justice can be extremely difficult to deal with, especially when the tax law is one of the most difficult areas of law to navigate, even for lawyers.

 

Our team of experts at Rosen Kirshen Tax Law have significant experience with appeals to the Tax Court of Canada and beyond. If you are seeking to appeal an assessment, reassessment, or notice of confirmation, contact us today to schedule a free consultation with one of our expert tax lawyers.

 

This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions, you should consult a lawyer.

by Jeff Kirshen

The Tax Court of Canada – How to Start the Process

What is a Notice of Appeal?

A Notice of Appeal is a document that is filed with the Tax Court of Canada (or whatever court the taxpayer is appealing to), to provide that court with notice that you are appealing a decision, of either a lower court, or in our case, a Canada Revenue Agency decision (“CRA”).

A Notice of Appeal is rather straightforward in its purpose, but can be rather complex to draft, and file.

 

What is the Purpose of the Notice of Appeal?

The purpose of filing a Notice of Appeal in the Tax Court of Canada is to continue fighting a CRA decision. You cannot appeal an assessment under the Income Tax Act (“ITA”) or Excise Tax Act (“ETA”), unless you have already filed a Notice of Objection. Generally, that objection will result in a reassessment, redetermination or confirmation. However, if the CRA takes too long in responding to your objection, you may file an appeal directly to the Tax Court without having first received a decision.

 

Informal versus General Procedure

There are two types of procedures at the Tax Court of Canada (and your choice of procedure must be identified in your notice of appeal): the Informal Procedure and the General Procedure.

The informal procedure is designed for smaller disputes, to help minimize the length of time of a proceeding and to simplify what is required. For starters, in the informal procedure, there is no filing fee associated with filing your appeal. To qualify for the informal procedure, your amount in dispute per year (federal tax and penalties) must not be greater than $25,000. If the matter relates to GST, then this limit is set at $50,000.

The general procedure on the other hand, is more formal and rigid than the informal procedure. There is a filing fee associated with the appeal and it will vary depending on the dollar value of the appeal. The different classes are as follows:

• Class A
  • Where the amount in issue is less than $50,000
  • Filing fee is $250
• Class B
  • Where the amount in issue is between $50,000 and $150,000
  • Filing fee is $400
• Class C
  • Where the amount in issue is over $150,000
  • Filing fee is $550

The General Procedure is governed by the Tax Court of Canada Rules and, deviation from the rules, is strictly prohibited unless a court order is obtained stating otherwise.

When appealing under the General Procedure, you may represent yourself or be represented by a lawyer. However, corporations must be represented by a lawyer.

In most situations, once you file a Notice of Appeal, the debt you owe is uncollectible by the Canada Revenue Agency’s Collections Department until your file is over and a decision has been rendered. However, it is important to remember that interest will continue to accumulate on this amount during this time frame. Furthermore, if your appeal involves trust funds, those funds remain collectible. So it is very important to be in touch with CRA Collections to ensure that they do not take legal action against you while you are fighting in the Tax Court.

The Department of Justice (the lawyers for the CRA), then have 60 days from the date a taxpayer files a Notice of Appeal to submit a Reply (their response).

 

Overall, while the Notice of Appeal seems rather straightforward, the process for drafting and filing of the appeal can be rather complex. More importantly, if the process is not executed correctly, it can prevent you from having your day in court. If you have any questions or need any assistance regarding the preparation and filing of a Notice of Appeal, or any Tax Court matter, please feel free to call us today!

 

**Disclaimer

This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions you should consult a lawyer.

by Jeff Kirshen

The Home Buyers’ Plan and the CRA

The Home Buyers’ Plan (“HBP”) is a program that allows qualified first-time home buyers (the definition for which can be found below) to withdraw up to $35,000 from their RRSP on a tax-free basis, to buy or build a qualifying home for themselves or a related person with a disability.

Under the HBP program, an individual can pay back the withdrawn funds over 15 years. The program is great for those looking to use the funds towards a down payment on a home. However, there are strict conditions to meet to be eligible for the HBP program. If all of the conditions are not met, taxpayers risk having the amount of money withdrawn added to their income for the year.

The withdrawal can be made in a single amount or a series of withdrawals in the same calendar year. Only the person who is entitled to receive payments from the RRSP can withdraw the funds from the account. Individuals are also allowed to withdraw funds from more than one RRSP as long as they are the owner of each one. The RRSP contributions must also have been in the RRSP for at least 90 days before they are withdrawn under the HBP program. In addition to these requirements, there are more conditions that must be met, which is discussed below.

 

First-time Home Buyer

To qualify for the HBP program, a taxpayer needs to meet the definition of “first-time home buyer”. This includes those who are purchasing a home for the first time in their life. However, individuals who have withdrawn money from their RRSP under the HBP, or otherwise, can still be considered a first-time home buyer for the program, if all the following conditions are met:

1. An individual is a first-time home buyer if, within four years, they did not occupy a home that they, or their current spouse or common-law partner owned. If the individual’s spouse or common-law partner owned a home previously, they can still be considered a first-time home buyer but some additional conditions need to be met; and
2. The four-year period begins on January 1^st of the fourth year before they withdraw the funds.

 

Additional Requirements for the Home Buyers’ Plan

According to the CRA’s publication How to participate in the Home Buyers’ Plan (HBP), the following conditions are required for eligibility under the HBP program.

1. The taxpayer must be considered a first-time home buyer;
2. The taxpayer must have a written agreement to buy or build a qualifying home, either for themselves or for a related person with a disability; a qualifying home is a housing unit located in Canada. It includes single-unit dwelling homes, apartments, condominium units, mobile homes, townhouses, and semi-detached homes, among others.
3. The taxpayer must be a resident of Canada, for tax purposes, when they withdraw funds from their RRSP under the HBP and up to the time a qualifying home is bought or built; for more information on tax residency, see the
4. The taxpayer must intend to occupy the qualifying home as their principal place of residence within one year after buying or building it. If they buy or build a qualifying home for a person with a disability or help a related person with a disability buy or build a qualifying home, they must intend that the related person with a disability occupies the qualifying home as their principal place of residence; and
5. In all cases, if the taxpayer had previously participated in the HBP, they may be allowed to do so again if their repayable HBP balance on January 1^st of the year the withdrawal is zero and they meet all other HBP eligibility conditions.

CRA’s How to participate in the Home Buyers’ Plan (HBP), also further outlines the following conditions for the RRSP withdrawal to be eligible under the program:

1. Neither the taxpayer nor the spouse or common-law partner or the related person with a disability can own the qualifying home for more than 30 days before the withdrawal is made;
2. Normally, the taxpayer will not be allowed to withdraw funds from a locked-in RRSP or a group RRSP;
3. The taxpayer has to buy or build a qualifying home for themselves, or a related person with a disability, or to help a related person with a disability buy or build a qualifying home before October 1^st of the year after the year of the withdrawal; and
4. The taxpayer must fill out Form T1036, Home Buyers’ Plan (HBP) Request to Withdraw Funds from an RRSP, for each eligible withdrawal.

 

If you are interested in participating in the HBP or have had your withdrawal under the program denied, our team of experts can help! Contact us today to make an appointment to speak with one of our experienced tax lawyers.

 

**Disclaimer

This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in the articles. If you have specific legal questions, you should consult a lawyer.

by Jeff Kirshen

Canada’s Emergency Rent Subsidy

The Canada Emergency Rent Subsidy (“CERS”) was introduced on November 19^th, 2020. The CERS subsidizes commercial real estate expenses incurred by businesses negatively affected by COVID-19. Canadian businesses, non-profits organizations, or charities that experienced a drop in revenue during the pandemic may be eligible for the subsidy to help cover some of their commercial rent or property expenses.

CERS is available as of September 27, 2020. Similar to the Canada Emergency Wage Subsidy (the “CEWS”), CERS payments come in the form of a refundable tax credit under the Income Tax Act (the “ITA”). Qualifying renters and property owners can receive payments directly without the participation of landlords. Eligible businesses may also qualify for lockdown support if the business location is significantly affected by a public health order for a week or more.

CERS is available for expenses paid from September 27, 2020 onwards, and applications can already be made online.

 

Eligibility Requirement

CERS applies to expenses paid in connection with a qualifying property. Generally, a qualifying property includes any commercial real estate in Canada. However, there is an exception for personal dwellings that are used as a residence. Meaning that expenses paid on home offices or other businesses run from the claimant’s home is disqualified.

Similar to CEWS, entitlement to CERS is segregated into periods. The qualifying periods are the same for CEWS and CERS. The first qualifying period which the CERS is available if from September 27^th, 2020 to October 24^th, 2020.

Whether a claimant is entitled to CERS may vary by qualifying period. For instance, an entity may qualify for CERS in one qualifying period but not another, depending on their applicable revenue decline. Since CERS is effective as of September 27^th, 2020, it only applies to the eighth qualifying period and beyond.

To qualify for CERS, a claimant must be an eligible entity, meaning:

1. A corporation or trust, other than a public institution or tax-exempt corporation or trust;
2. An individual;
3. A registered charity, other than a public institution;
4. Certain tax-exempt entities, other than a public institution; or
5. A partnership, all of the members of which are an entity referred to above.

The eligible entity must experience a drop in revenue. Eligible revenue generally includes revenue earned in Canada from:

1. Selling goods;
2. Rendering services; and
3. Others’ use of your resources.

Businesses can use their normal accounting methods to calculate their eligible revenue. The rules for calculating eligible revenue are the same for CEWS.

The eligible entity must also have a qualifying property. Once again, CERS subsidizes a portion of an entity’s qualifying rent expenses. Generally, there are two types of eligible expenses – rent and specified realty costs.

Finally, the eligible entity must meet one of the following conditions:

1. On March 15, 2020, the eligible entity had a payroll account registered with the CRA;
2. On March 15, 2020, the eligible entity had a payroll service provider in place to make remittances on its behalf regarding one or more of its employees (and the payroll service provider continues to make such remittances); or
3. On September 27, 2020, the eligible entity had a CRA business number.

 

Maximum Expense Limit and Affiliated Groups

There is an upper limit of $300,000 for all qualifying rent expenses within a given qualifying period for an eligible entity. This could mean, for example, that an entity using more than four commercial properties may be restricted in their CERS claim.

Additionally, the $300,000 limit must be shared between all affiliated entitles. Consequently, if a qualifying renter is affiliated with another eligible entity claiming CERS, each affiliated entity must enter into an agreement allocating a percentage of that aggregate $300,000 limit amongst themselves.

 

Lockdown Support

Similar to CEWS, there is a top-up concept with CERS, where qualifying entities can receive additional subsidy. Qualifying entities subject to a public health restriction can apply for the lockdown support. Essentially, a public health restriction is a public health order issued in response to COVID-19, resulting in complete cessation of certain business activities.

A qualifying entity under a public health restriction may claim the CERS top-up subsidy even if their overall revenues only minimally declined. However, keep in mind, not all public health orders will trigger access to the CERS top-up.

 

Application

The CRA has already opened applications for CERS. The CRA’s main webpage regarding CERS, with general information and links to the application process, can be found here.

Keep in mind that eligible entities have until 180 days after the end of the relevant qualifying period to apply for CERS and/or lockdown support. The last day to apply for claim period 9 (May 9 to June 5, 2021) is December 2, 2021.

 

If you have any questions or concerns, speak with a tax lawyer to discuss if CERS or any other benefits apply to your particular circumstances. Contact us today!

 

**Disclaimer

This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions you should consult a lawyer.

by Jeff Kirshen

The New Canada Recovery Hiring Program

The Federal Government recently announced a new program to assist businesses that have been impacted financially by the Covid-19 pandemic. The Canada Recovery Hiring Program (“CRHP”) offers eligible employers who have experienced a declined in revenue as a result of the pandemic, a subsidy of up to 50 per cent of eligible salary or wages. The goal of the new program is to help businesses increase their hiring and employment practices during a financially difficult time.

Eligible Employers can apply for CRHP support through the Canada Revenue Agency (CRA) for June 6, 2021 (retroactively), through to November 20, 2021.The CRHP will overlap with the Canada Emergency Wage Subsidy (“CEWS”) and eligible employers can choose to claim wage support from either program. Employers can choose the subsidy of whichever program provides them with the greater amount, but they will not be able to use both within the same claim period. CEWS will automatically be applied if both amounts are equal.

 

What is the Difference Between CEWS and CRHP?

The main difference between the two programs is the way that the subsidies are calculated. Please refer to the CRA website for a breakdown of the similarities and differences between the calculation.

 

Who is Eligible?

Most of the eligibility criteria for CRHP and CEWS are the same, including payroll account requirements and required revenue drops.

Most types of employers who are eligible for the CEWS will also be eligible for the CRHP. However, there are some additional requirements for “for-profit” corporations and partnerships to be eligible for the CRHP.

For-profit corporations are eligible only if they are a Canadian-controlled private corporation, and are also eligible for the small business deduction, or are a partnership where at least 50% of interest are help by employers eligible for the CRHP.

You should note that if your employees are eligible for CEWS, then they are also eligible under CRHP. However, employees who were on paid leave are not eligible to be included in the CRHP calculation.

 

How Claim Periods Work

The claim periods for the hiring subsidy match the claim periods for CEWS. Each claim period is a specific period of 4 weeks, beginning on a Sunday.

The subsidy does not renew automatically. Each period, you must confirm that you’re eligible and calculate your amount according to that period’s rules before you apply.

There is a deadline to apply or increase your claim for each period.

 

How to Apply

Unlike CEWS, you only submit one CRHP application for each claim period you are eligible for, even if you have more than one payroll (RP) account. Using the online calculator, you can enter your revenue and employee pay information to see whether your CRHP or CEWS claim would be higher and therefore which subsidy is best to apply for.

There are three ways to apply:

(1) Through your My Business Account, you can find the CRHP application under “Payroll” on the main menu;

(2) Business representatives may apply using the Represent a Client feature. However, note that only representatives authorized at Level 2 or 3 will be able to apply; or

(3)  If you are not able to apply with either of the options mentioned, you can use the Web Forms application by using your web access code (WAC).

 

What Happens After I Apply?

If you are registered for direct deposit, you can expect your payment within 3 to 8 days, and the same for time frame applies for cheques but you also must add mailing time. Each claim period deadline is 180 days after the end of the claim period. There is no availability to change or cancel online yet, however if you need to change from CRHP to CEWS, you can simply submit an application for CEWS that will then replace your CRHP application.

After your application, you will receive a Notice of Determination to know if your claim was accepted, and how much you will receive.

 

If you have any questions or concerns, speak with a tax lawyer to discuss if the CRHP or any other benefits apply to your particular circumstances. Contact us today!

 

**Disclaimer

This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions you should consult a lawyer.

by Jeff Kirshen

How to Apply for the Disability Tax Credit Certificate

We previously explained what the Disability Tax Credit was in our blog post found here. This blog post will explore how to apply for the credit.

 

How to Apply for the Disability Tax Credit Certificate

When applying, you must fill out and submit form T2201 (Disability tax credit certificate) to the CRA. The individual applying would fill in Part A, and Part B must be filled out by your medical practitioner. Medical practitioners for the purpose of this application include:

• Audiologists;
• Medical doctors;
• Nurse practitioners;
• Occupational therapists;
• Optometrists;
• Physiotherapists;
• Psychologists; and
• Speech-language pathologists.

 

What are the Eligibility Requirements for the Disability Tax Credit Certificate?

The eligible impairments for the DTC include areas such as:

• Vision;
• Speaking;
• Hearing;
• Walking;
• Eliminating (bowel and bladder functions);
• Feeding;
• Dressing; and
• Mental functions necessary for everyday life.

As mentioned, the disability must be severe and prolonged, and must result in a marked restriction. The CRA defines a marked restriction as one that, “even with appropriate therapy, devices, and medication, the individual is unable or takes an inordinate amount of time to perform activities or functions in one of the listed categories, and this is the case all or substantially all of the time”. The above-mentioned criteria does not apply to vision or life-sustaining therapy as they have their own conditions which are outlined by the CRA.

The CRA also defines prolonged to mean either the disability has lasted for 12 months continuously, or it is expected to last 12 months or more continuously.

 

What Happens Once the Form is Submitted?

The CRA will review all applications thoroughly before denying or accepting the claim. Their decision will be based on the information given by the medical practitioner. If your application is accepted, you will receive a notice of determination which will show which years you are eligible for the DTC. If you are denied, you will still receive a notice of determination and it will explain why the application was denied. If you disagree with the decision to deny your request, you can submit an objection to your local tax center.

 

Overall, knowing how to navigate the CRA application process will make submitting your claim much easier, and will increase the likelihood of its success. If you have any questions or need any assistance regarding disability tax credits, or any tax matter, please feel free to contact us today!

 

**Disclaimer

This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions you should consult a lawyer.

by Jason Rosen

Implied Undertakings in the Tax Court of Canada

An undertaking is a legally binding promise to do or provide something, or to refrain from doing something or providing something. Undertakings can exist in different forms depending on the context. For example, the seller in a real estate transaction may agree to an undertaking to produce certain documents related to the property. Alternatively, in criminal cases, bail is a form of undertaking where the accused is released under the promise to appear in court when required. For this article, we will be discussing undertakings in the context of Tax Court proceedings and appeals.

 

Examination for Discovery

Examination for Discovery is an official court proceeding where each party may examine the opposing side under oath. The process can take the form of Oral Discovery, where parties are examined in person; or it can take the form of Written Discovery, where parties are examined through written requests. Discovery facilitates the exchange of information before trial, thus ensuring the litigation process remains fair and efficient.

 

What is the Implied Undertaking Rule?

The Implied Undertaking Rule limits each party’s right to use the information obtained through the Examination for Discovery process, with some exceptions. The rule prohibits each party from using information obtained through discovery for any other purpose or in any other context other than the specific proceeding. The rule is critical to ensure fairness in the litigation process by protecting the privacy interests of the litigants, and in turn, encourage a complete and truthful Discovery process.

The Implied Undertaking Rule is set out in Juman v. Doucette (2008 SCC 8). The rule has a broad scope: it applies to all documentary and oral information obtained during discovery. Parties are not allowed to use the information except for that litigation, with certain exceptions.

However, according to Juman, a court may exercise its discretion to relieve a party from an undertaking under certain conditions. The Court decide whether, on a balance of probabilities, the public interest in permitting the disclosure outweighs the privacy interests of the party and the goal of promoting efficiency in the court system.

In the context of Tax proceedings, one important factor to consider when balancing public and private interests is whether the parties and issues are similar to another action. In Juman, the Supreme Court of Canada found that there is virtually no prejudice to the discovered party, and leave will generally be granted where the discovery material in one action is sought to be used in another action with similar parties and similar issues.

 

What are the Consequences of Breaching the Implied Undertaking Rule?

The consequences of breaching an implied undertaking can vary depending on the context. These consequences can range from a stay of proceedings, substantial costs awards, or contempt proceedings. However, in other cases, it may not result in a remedy at all.

Fio Corporation v. The Queen (2014 TCC 58) is an example of a particular costly consequence of breaching the Implied Undertaking Rule. In this case, the Taxpayer brought a motion to direct the Minister of National Revenue (the “MNR”) and the Attorney General of Canada (the “AGC”) to pay $100,000 as “punishment for her/their contempt of [the Tax Court of Canada]” and costs on a full indemnity basis for breach of the Implied Undertaking Rule.

In Fio, the Taxpayer filed a Notice of Appeal to the Tax Court of Canada in response to a reassessment by the MNR and provided the MNR with the Notice of Appeal along with several supporting documents. The Taxpayer made it clear in a letter to the MNR that the supporting documents were provided to minimize time and costs and to reach a settlement. However, the MNR reassessed the Taxpayer using the supporting documents for tax years beyond the scope of the original appeal.

The Tax Court of Canada held that an implied undertaking exists the moment a taxpayer provides discovery documents to the MNR and AGC. This implied undertaking prohibits the MNR and AGC from using the documents for purposes outside of the appeal. Furthermore, the court found the use of the material without leave constitutes an abuse of process, which was also deliberate.

In the end, the Court awarded substantial costs of $25,000 to the appellant against the MNR for breach of the implied undertaking rule. Furthermore, the Court ordered the documents not to be used by the MNR for additional reassessments.

Due to the nature and scope of the implied undertaking rule and the potential remedies available for a breach, litigants should be mindful of how they handle discovery documents and the potential implications from the implied undertaking rule.

 

If you are having trouble with an appeal to the Tax Court of Canada, contact us today to schedule an appointment with our team of experts at Rosen Kirshen Tax Law.

 

**Disclaimer

This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in the articles. If you have specific legal questions, you should consult a lawyer.

by Jason Rosen

Tax Court of Canada – The Book of Documents

What is a List of Documents?

Before we can dive into the book of documents, we must briefly discuss the list of documents (“LOD”), which is a mandatory litigation step pursuant to the Tax Court of Canada Rules (General Procedure) – specially rule 81. The LOD is a list of all documents that a party has in their power, possession or control that they plan on relying on at the inevitable hearing.

This list is generally organized chronological order starting with the earliest dated documents and ending with the documents most closely dated to the day the list of documents is made. The Parties must provide this list to the other side well in advance of trial so that the opposition can have adequate time to inspect the documents and prepare their examination questions on discovery.

The Parties submit a joint request for a litigation timetable which would include the date that the LOD must be exchanged by and filed with the Court.

 

What is a Book of Documents?

The book of documents (“BOD”) as it is known, relates to the discovery stage of a Tax Court matter (or any court matter for that reason). While this is not a formal step in the dispute resolution process, it is common practice to exchange the BOD at least thirty (30) days prior to the examinations for discovery (whether in writing or orally). The BOD contains all the relevant documentation that a side will be using to help prove their case or will be using to help demolish arguments made by the other party. Any documents that are going to be referred to at the hearing must be included in the previously mentioned LOD, produced in the BOD or by way of undertaking following the examinations for discovery.

Each party must prepare four copies of the BOD ahead of trial. One copy for yourself to keep, one copy for the judge, one copy for the opposing counsel, and the last copy will stay in the witness box to assist them in answering the questions asked by counsel.

 

What is a Joint Book of Documents?

A joint book of documents (“JBOD”) is highly advisable for parties who have the ability to be civil with one another, as a JBOD can help save your client or yourself (if self-represented) a sizeable amount of money. A JBOD involves both parties to a dispute agreeing on which documents should be produced within the book, and which documents are unnecessary and therefore do not need to be included. The parties submit one joint book, rather than each party submitting their own book of documents. All the previously mentioned rules for the LOD and BOD still apply when the book is made jointly. Overall, this is a fantastic method to save money when practically possible by the cooperation of both parties and is greatly appreciated by the Court (and the environment).

 

Overall, the requirements relating to the list of documents and book of documents may seem simple but are quite complex. Failure to properly file and serve the list of documents and/or produce the book of documents can have a detrimental impact on the potential success of your Tax Court of Canada case (or any level court case for that matter). If you have any questions or need any assistance, please feel free to call us toll free at 877-921-8423 or email us at info@rktaxlaw.com.

 

**Disclaimer

This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions you should consult a lawyer.

 

Related Articles:

• Tax Court of Canada – Settlement Conference
• Navigating the Tax Court of Canada
• How to Object to a Notice of Assessment or Reassessment

by Jeff Kirshen

Why you Should Keep your Receipts

Keeping your receipts, regardless of the field it pertains to, is a prudent and highly advisable practice. In the area of tax, this practice becomes even more important. In the event you should be audited, reassessed, or be the subject of a processing review, the Canada Revenue Agency (“CRA”) will request (and frankly demand) that the appropriate receipts be provided to verify the information you filed on your tax return is accurate. Keeping your record books accurate will help to ensure the process is as painless as possible.

 

Where do I Keep my Records?

The CRA has stated that you must keep your records at either your place of business (for any business records) or at your residence, unless the CRA has given you express permission to keep them elsewhere. If you would like to obtain the CRA’s permission to keep your records elsewhere, you will need to write to your local tax services office.

 

How long do I have to keep records for?

The record keeping requirement stems from paragraph 230(4)(b) of the Income Tax Act. This section states that every person carrying on business and/or every person who is required to pay taxes shall keep all records and books that are necessary to verify the information until the expiration of six years from the end of the last taxation year. In theory, if you are filing your 2020 return, you should keep the documents until 2026. However, this rule does have some caveats. The six-year requirement for keeping documents relates not only to the original tax year in which you file, but also relates to the tax year in which you are claiming a certain expense/deduction, etc.

Looking at our previous example, when filing your 2020 tax return, the minimum requirement for keeping the relevant documents is 2026. However, if you plan on carrying a business loss forward to use in a future year (say 2030), then the relevant documents to prove the business loss must be kept until 2036. The six-year requirement not only relates to the original year the return was filed, but more importantly, it relates to the year in which the taxpayer plans to use that document.

 

Can I Destroy the Records before the Six-year period Expires?

If you want to destroy the records prior to the retention period expiring, you must request permission from the CRA to do so. In order to obtain this written permission, either yourself or your authorized representative must do one of two things:

• Complete the Form T137 (Request for Destruction of Records); or
• Apply in writing to your local Tax Services Office.

 

In what Situations does the Six-year limitation Period not Apply?

The six-year limitation period does not apply to all possible situations. Some situations in which a different limitation period applies includes:

• When your records and supporting documents concern long-term acquisitions and disposal of property, the share registry, or other historical information that would have an effect on the sale, liquidation or wind‑up of the business, you have to keep them indefinitely.
• If the CRA wants you to keep records for a period longer than six years, a CRA official will let you know how long to keep them either in person or by registered mail.
• If you file an income tax return late, you must keep your records for six years from the date you file that return.
• If you filed an objection or an appeal, you must keep all necessary records until the latest of the following dates:
  • the date the objection or appeal is resolved;
  • the date for filing any further appeal has passed; or
  • the six-year record keeping period has passed.

 

What if I don’t have my Receipts?

All is not lost if you did not keep all of your receipts. That being said, it does make proving your expenses much more challenging. You may attempt to use other methods of proving the expenses, such as bank and credit card statements. The CRA, however, will likely have a hard time accepting your expenses claims. In these types of situations, you should seek the assistance of a professional.

 

Overall, the CRA requirements for record keeping seem simple, but are quite complex. Failure to retain your records for the appropriate period can have a detrimental impact on the successful defence of any audit, processing review, etc. If you are going through a CRA review, and you need assistance with proving your receipts and expenses, contact us today!

 

**Disclaimer

This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions you should consult a lawyer.