CRA Operational Update: Ten Things You Need To Know
A CRA status update on tax controversy and dispute resolution from Stevan Novoselac and John Sorensen of Gowling WLG
Stevan Novoselac is the Canadian leader of Gowling WLG's Tax Dispute Resolution team. John A. Sorensen is a partner at Gowling WLG in Toronto, where he specializes in tax and tax dispute resolution.
TORONTO – On June 23, two senior Canada Revenue Agency ("CRA") officials outlined a status update on tax controversy and dispute resolution at this stage of the COVID-19 pandemic. This previewed the CRA's progression from "critical services" mode, to a "business continuity" plan and finally to a "business resumption" plan starting June 29. As the presentation was not recorded, we are providing our list of ten top ten areas addressed.1
- Notices of Objection
- While most CRA Appeals officers are working from home and can only take their work so far, progress continues being made with technological capabilities. Therefore, in the near term taxpayers might expect some delay in resolving their disputes.
- However, work on files referred to CRA headquarters for review (including large files, aggressive tax planning and transfer pricing) has mostly been ongoing despite the pandemic. If anything, the shutdown may have enabled CRA officials at headquarters to catch up on workload.
- The CRA's Appeals division will continue accepting supplemental submissions.
- While the Assessment, Benefit, and Service Branch had been devoted to dealing with subsidy and support programs during the pandemic and therefore had limited capacity to process and issue reassessments, these are now advancing. The CRA is seeking to be sensitive to the needs of individuals and small businesses and is showing forbearance for now, unless a reassessment needs to be issued immediately (for example, where the year or period may become statute-barred).
- When a CRA Appeals officer has concluded that an assessment should be varied or vacated, reassessments generating a refund are a priority. There may be some delay for complex matters while an Appeals recommendation gets reviewed at a higher level.
- Transfer Pricing
- Advance Pricing Arrangements and Mutual Agreement Procedure matters remain in progress and timelines for mandatory arbitration are not delayed, as pending matters have been moving forward.
- Submissions to the Transfer Pricing Review Committee are being accepted and considered and outstanding requests for contemporaneous documentation that were cancelled have since been reissued (thus, as of June 10, the compliance clock for contemporaneous documentation is again ticking).
- Impending Statute-Barred Dates
- Treaty-based limitation periods are fixed and as a result meeting them has remained a high priority.
- For domestic limitation periods, the CRA is receptive to waivers of the normal reassessment period and managing files that may become statute-barred remained a priority.
- Bill C-17, An Act respecting additional COVID-19 measures
- This proposed legislation (which has so far only gone through first reading in Parliament), will allow for Ministers with responsibility for particular Acts of Parliament to adjust listed time limits and periods under those statutes.
- The Minister of National Revenue will have the power to extend certain deadlines under the Income Tax Act (Canada) ("ITA") and the Excise Tax Act (Canada) ("ETA"). The normal reassessment periods and related exceptions under the ITA and ETA may be extended and the rigid timing requirements for SR&ED filings would also be relaxed. The draft legislation would also address the time periods for seeking an extension of time to object to an assessment. Missing a deadline to object can be addressed by seeking an extension of time, but ordinarily if the extension period lapses a taxpayer would be irrevocably prejudiced. Whether the legislation is ultimately enacted is uncertain and taxpayers are urged to file objections or extension requests as soon as possible, rather than planning to rely on proposed extensions in the draft legislation.
- The purpose of Bill C-17 is primarily to assist the Canadian public and if/when the legislation is enacted it is expected to be interpreted fairly and reasonably. The CRA is unlikely to try to take advantage of any retroactive effect to reopen periods that became statute-barred in the time leading up to the legislation being enacted.
- Late-filed Elections, Designations and Objections
- Taxpayers should not count on blanket automatic extensions of time for late-filing elections, designations or notices of objection. There are subtleties in the interpretation of the relevant provisions and taxpayers and their advisors should look not only at the statute(s), but at the CRA's published guidance. For notices of objection that were due between March 18 and June 30, the filing deadlines have been automatically extended to June 30.
- Taxpayer Relief
- Taxpayer relief can be granted proactively or on application by a taxpayer. The CRA typically grants proactive relief where it recognizes its own delays in managing a file have resulted in interest accrual. Where the CRA has extended certain filing deadlines, neither penalties nor interest will be charged, if the filings are made by the extended deadline.
- Otherwise, whether a taxpayer may be granted relief in connection with the pandemic is determined on a case by case basis. Some audit and appeal work has continued, while some files have stalled. If a matter has progressed despite the pandemic, there would be no basis for interest relief.
- The CRA anticipates a deluge of relief requests and recommends filing them online to help expedite review and results.
- Voluntary Disclosures Program ("VDP")
- The VDP has resumed operations and has been gradually expanding its operations since mid-May. However, there is a backlog, due to both the influx of applications made before the VDP changed in 2018 and the pandemic.
- Taxpayer Communications
- The best way to liaise with the CRA is often through its online portal. Information can be uploaded with a limit of 150MB per file (large files might need to be broken up). The CRA's e-services helpdesk can provide support and can be reached at 1-800-959-5525.
- While CRA officers may in certain circumstances communicate via cell phones or email, this is regarded as insecure and thus at the taxpayer's own risk. Video conferencing may become an option at a taxpayer's request. For now, there are no in person meetings.
- Everyone at CRA headquarters should be available and approximately 70% of the rest of the workforce should be reachable. It cannot yet be guaranteed that everyone is checking messages and returning calls.
- Regular mail of course remains an option as mailrooms become increasingly operational, although perhaps less timely.
- Requirements for Information ("RFI") and Audits
- For pending RFIs, the CRA will contact taxpayers if the requested information is still needed. RFIs issued before March 16 with deadlines after that date will be reviewed.
- The CRA plans to be accommodating with the timing for complying with 30 day letters, unless a taxation year may imminently become statute-barred.
1. This summary is based on our notes from the Advocates' Society event, provided as a service for the information and benefit of interested parties unable to attend. Accordingly, while this reflects our best efforts to accurately transmit helpful information to our readers, it should not be taken as setting out official CRA positions.
Stevan Novoselac is the Canadian leader of Gowling WLG's Tax Dispute Resolution team. John A. Sorensen is a partner at Gowling WLG in Toronto, where he specializes in tax and tax dispute resolution. Read the original article on GowlingWLG.com.