Tax & Trade Blog

As we blogged on here, CRA has recently taken steps to reverse what was generally understood to have been their historical position on employer eligible ITCs in pension plan situations involving insurance segregated fund products.

In a recent Excise News Publication, CRA doubles-down on this position in a very public way, seemingly setting the stage for audits in this area to come.

After more than 30 years, the Canada Revenue Agency (“CRA”) is revoking an administrative arrangement with the Canadian Dental Association that simplified claiming input tax credits (“ITCs”) for GST/HST registered dental practitioners who make both taxable zero-rated supplies (e.g., orthodontic appliances and cosmetic services) and tax-exempt supplies (e.g., dental and orthodontic services). 

Per CRA Notice 339, the CRA is revoking its administrative arrangement as it moves towards a stricter adherence to the rules in the Excise Tax Act (“ETA”) – likely requiring more detailed records. 

This shift appears to be a response to recent Court decisions holding that supplies of orthodontic appliances and orthodontic services are separate supplies – opening up the ability to claim ITCs (which we have written about here). 

The changes take effect beginning as early as January 1, 2025!

As we have previously written about here, the CRA has been modernizing its electronic services.  As part of these changes, the CRA has updated the GST/HST e-filing returns to require additional lines of detail.  Businesses e-filing their GST/HST returns need to understand this new change and complete their GST/HST e-filing returns properly!

As of May 13, 2024, registrants e-filing their GST/HST returns have been encountering the new forms, and the CRA reminded registrants of the change in its Excise GST/HST News – No. 117. 

Those who previously filed paper returns will immediately recognize these additional details as lines from the paper returns which have now been migrated over to the e-filing system.

As a tax lawyer assisting clients in defending themselves against the all-powerful CRA (and its equally powerful ally, the Department of Justice – Canada’s largest and best-equipped law firm), I welcome any judicial decisions that help to right that power imbalance. 

Justice Patrick Boyle’s recent decision in Frigorific Warehouse is an exceptional attempt at addressing an inherent problem with Canada’s GST/HST system, which lacks proper mechanisms to deal with tax rogues who gain access to the CRA’s registration system to charge, collect and abscond with GST/HST funds from unsuspecting Canadian businesses. The CRA’s traditional position has been to attempt to recover the lost GST/HST from these unsuspecting businesses (by denying them input tax credits – “ITCs”). Justice Boyle’s decision seems to put that ability into serious question!

In December 2023, the Supreme Court of Canada dismissed the Crown’s application for Leave to Appeal the Federal Court of Appeal (“FCA”) decision in Canada v. Dr. Kevin L. Davis Dentistry Professional Corporation 2023 FCA 76(“Davis”), leaving the FCA decision as the state of the law.  The FCA had upheld the Tax Court of Canada’s (“TCC”) judgment (2021 TCC 25) allowing Dr. Davis to claim input tax credits (“ITCs”) incurred in the course of suppling orthodontic appliances and services to patients.