Source: https://www.taxandtradelaw.com/easyblog/Latest/Page-3.html
Timestamp: 2019-04-22 05:24:53+00:00

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Is It Worth Appealing My Tax Assessment?
In Canada, legal costs are generally awarded to the successful litigant in a tax appeal (or in most civil cases for that matter) based on actual costs incurred, but are often a mere fraction of the actual costs that a litigant has incurred. As such, the first thing that many taxpayers contemplate when deciding whether to appeal a CRA assessment is whether or not it is worth it, particularly where it appears likely that the costs of a tax appeal will probably exceed the amount of tax in dispute.
While the decision on whether or not to appeal a tax assessment should be made on a case by case basis, the Tax Court of Canada (“TCC”) in Ike Enterprises Inc. v. The Queen, 2017 TCC 160 (“Ike Enterprises”) recently confirmed that in appropriate circumstances, a taxpayer can be awarded legal costs that exceed the amount of tax in dispute. In fact, the CRA was ordered to pay costs equal to approximately 140% of the amount in dispute!
With US President Donald Trump hinting that he may withdraw his country from the North American Free Trade Agreement (“NAFTA”), many are starting to consider what the effects that such a withdrawal would have on goods and services crossing North American borders.
What has not been widely reported is the expected effect on business immigration (e.g., US and/or Mexican nationals seeking temporary entry into Canada for business or investment purposes).
Chapter 16 of NAFTA currently allows citizens of the US and Mexico (i.e. who are not Canadian residents) to enter Canada as a “business visitor” for temporary business or investment purposes, and stay in Canada for up to six months – all without a “work permit”. To qualify under these business visitor provisions, a traveller must be entering Canada for the purposes of engaging in qualifying activities (which include conferences, trade-shows, conventions, and business meetings for taking orders or negotiating contracts for goods or services for certain enterprises). (For a complete list of permissible activities, click here).
So what happens if NAFTA disappears overnight?
Some other options would still be available for business travellers needing to enter Canada temporarily.
In a previous blog post titled “CRA coming for contractors?” we discussed the recent decision of the Federal Court of Appeal in Rona Inc. v. Canada (Minister of National Revenue), which seemed to suggest that CRA may have a special project on the go to target Canadian home improvement contractors that are currently operating in the underground economy.
An email and website post from PayPal to its users earlier this week seems to indicate that the CRA is now going after all Canadians that buy and sell online.
In Canada, the CRA can often pursue a corporation’s directors for unpaid tax debts of the corporation. But there are certain “pre-conditions” that must be met.
One of these, which rarely gets any attention at all is the requirement that “a certificate for the amount of the liability of the corporation [be] registered in the Federal Court… and execution for that amount [be] returned unsatisfied in whole or in part”: see section 323(2)(a) of the Excise Tax Act (ETA) and section 227.1(2)(a) of the Income Tax Act (ITA).
Historically, the Courts have considered that these provisions do not impose an obligation upon the CRA to make reasonable efforts to search for assets of a corporate debtor; rather, all the CRA needs to do is “act in good faith”: see Barrett (2012 FCA 33).
In Tjelta (2017 TCC 187), the Tax Court of Canada (TCC) was asked to determine what the FCA meant in respect of the CRA’s good faith requirement.
Canada-Europe Free Trade Agreement Comes Into Force!
On September 21, 2017 the Canadian-European Union "Comprehensive Economic and Trade Agreement" or "CETA" came into force.
Some businesses may erroneously believe that this means they can ship anything they want beween Canada and the EU without paying any duties. While the reality is a little more complicated, CETA still represents a tremendous achievement for Canada, and provides Canadians with greater access to the massive EU marketplace of 500 million people!
Read the Statement by the Canadian Minister of International Trade here.
Can I Go To Jail For Tax Evasion?
Over the past number of years the CRA has been taking an increasingly aggressive stance against Canadian taxpayers who don’t meet their tax obligations. This approach has only intensified – and perhaps very rightly so – since the Panama Papers scandal broke. Since then the Canadian government has earmarked an additional $444.4-million between 2016 and 2021 to help the CRA crackdown on tax evaders.
In years past, tax evaders caught by the CRA could expect hefty fines and penalties, but would rarely face jail time. More recently however the CRA has been trying to put people engaged in tax fraud or tax evasion in jail.
A common step in the Tax Court of Canada litigation process is the Examination for Discovery (“Discovery”). A Discovery is where each side (the taxpayer and the Canada Revenue Agency or “CRA”) will have the opportunity to examine witnesses from the other side, under oath. This is typically done with the assistance of a tax lawyer, and affords each side the opportunity to ask questions and request documents relevant to the issues in the tax appeal. The Witnesses are under oath and must answer questions truthfully, with the Discovery recorded, and transcripts produced after-ward.
A recent tax case in the Federal Court of Appeal (FCA) involving the RONA home improvement chain (Rona Inc. v. Canada (Minister of National Revenue) seems to suggest that CRA may have a special project on the go to target Canadian home improvement contractors that are currently operating in the underground economy.
Federal Court of Appeal: Single Consideration Can Still Mean Multiple Supplies!
In the recent case of Club Intrawest v. Her Majesty the Queen (2017 FCA 151), the Federal Court of Appeal (the "FCA") was faced with a unique fact pattern not contemplated by the legislation. In dealing with this unusual situation, the FCA did what common law courts do best, and improvised a solution which it considered both fair and legally justifiable. In the process, the FCA has introduced a new gloss on the common law "single versus multiple supply analysis" and held that even where a recipient is only charged a single amount of consideration, a court may nevertheless find that there were two separate supplies, each with different tax treatment.
In a previous blog (click here) we wrote about the case of CBS Canada Holdings Co. v. The Queen (2016 TCC 85), and the limitations that decision placed on a lawyer acting as an advocate. In particular, the Tax Court of Canada (the "TCC") held that the law firm representing CBS had sworn an affidavit on a controversial issue, and in doing so had crossed the line between being an advocate for the client and inappropriately become involved in the facts of the case as a witness.
As we noted at the time, the decision was appealed to the Federal Court of Appeal (the "FCA"). The FCA has now issued its decision (2017 FCA 65), completely exonerating the lawyers for CBS!
Most businesses will, at some point, have to deal with a situation where they have made advance payments for goods and services that never end up being provided. The cause for this non-supply is often due to the fact that the supplier has become impecunious. This results in obvious commercial headaches for the recipient, which can be exacerbated by corresponding GST implications.
Typically in such situations, the recipient will pay GST to the supplier in respect of the advance payment and take a corresponding Input Tax Credit (“ITC”) in its next GST Return. The supplier is required to remit that GST collected to the fisc. Pursuant to subsections 232(1) and (3) of the ETA, where the supplier will not be making the supply (or, for other reasons, reduces the consideration owed for the supply), it can adjust, refund or credit the amount collected (including the GST collected), and issue a “credit note” to the recipient. In turn, pursuant to paragraph 232(3)(b), the supplier can apply an adjustment in its next GST return to reduce its net tax by the GST amount in the credit note. Correspondingly, pursuant to paragraph 232(3)(c) the recipient is required to apply an adjustment to increase its net tax by the same amount (to account for the portion of the ITC previously taken, but now credited).
To the extent that the supplier is impecunious, the recipient will be left with a situation where it has had to increase its net tax, pursuant to a credit note received that will never actually be honoured. This was exactly the situation in the TCC decision in North Shore Power Group Inc. (2017 TCC 1).
The recent Tax Court decision in Persepolis Contracting (2017 TCC 89) is another example of how the concept of agency is so important in the GST context. The case serves as a reminder that written documents will be central to the determination of whether an agency relationship exists, and suggests that it might be difficult to establish that written agreements constitute evidence of agency.
In Thangarajah v. Her Majesty the Queen (2017 TCC 72), the applicant and her corporation (collectively, the “applicants”) were issued Notices of Assessment in November 2014 for unreported income under the Income Tax Act. When the corporate applicant was audited by the CRA in early 2014, the applicant retained the services of an agent who held himself out to be a lawyer (the “agent”). It was the applicant’s understanding that the agent would do whatever was required to deal with the Notices of Assessment. In the months that followed, the applicant received calls from CRA Collections and the agent was informed and asked to take action. It was unclear what the agent had actually accomplished for the applicants except that he sent a letter to a CRA Collection Officer dated September 10, 2015 advising, among others, that he would initiate the “appeal process” soon (the “Letter”). The Collection Officer responded the following day indicating that the collection files had been updated with a further notation that an appeal had to be done as soon as possible. CRA Collections eventually seized the applicant’s bank accounts, leading to the firing of the agent. The applicants then found out that the agent was, in fact, a paralegal and that they suffered as a result of the agent’s failure to file the notices of objection.

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