Tax & Trade Blog

A recent Federal Court of Appeal (“FCA“) decision in Pillon v. Canada (2024 FCA 24) highlights the difficulties that Tax Debtors will face if trying to avoid GST and income tax debts.  Both the Excise Tax Act (“ETA”) and the Income Tax Act (“ITA”) have extremely powerful collections tools allowing the Canada Revenue Agency (“CRA”) to assess certain non-arm’s length persons (think spouses, children, relatives, close friends and associates) that have been transferred a Tax Debtor’s property for less than fair market value (“FMV”).  These rules can even apply to corporate shareholders receiving dividends from delinquent corporations.

The recent decision of the Tax Court of Canada (“TCC”) in Refind Environment Inc. v. The King (2024 TCC 2) is a poignant reminder of the importance of filing deadlines.

In Refind, the TCC dismissed an application for an extension of time to file a Notice of Objection against assessments under the Excise Tax Act (“ETA”) because the Registrant was one (1) day late in filing their application for an extension of time to the Minister of National Revenue (the “Minister”)!

A great new year’s resolution for Directors of a Canadian private corporations is to brush up on GST/HST and income tax compliance!  The reason is that where a corporation incurs a tax debt for GST, HST or income tax source withholdings, the directors of those corporations can be held personally liable.  For GST/HST purposes, this potential liability encompasses virtually all the net tax obligations of the corporation!  

A recent case demonstrates the high standard directors need to uphold, even when imposed with incredibly difficult situations in which the government has played a hand.

If there was such a thing as a “10-Alarm” fire, CRA’s public release of GST Interpretation RITS 202403 would seem to fit that bill.

In this April 2023 Interpretation – issued only a few weeks ago – CRA takes the view that Employers with pension funds invested in an insurer’s segregated funds, are NOT eligible to claim ITCs for the GST/HST payable on the investment management fees (“IM Fees”) paid directly out of those funds.

On one level of analysis, CRA has done an about-face and reversed a prior 2012 Ruling in this area (which seemed to have addressed the same situation).  While CRA may disagree with that statement, this does appear to be a potentially significant “reinterpretation”.

When our Firm sees a spike in Ontario Employer Health Tax (“EHT”) files, we know that something is up.  And this may not bode well for employers that have traditionally viewed Ontario’s relatively low-rate EHT as an unimportant tax, delegating its compliance to payroll providers, staff members, and others.

Background

Ontario’s EHT is an employer liability payroll tax imposed on total Ontario remuneration paid to current and former employees.  With the  employer’s “exemption amount” (recently raised to $1,000,000 for most “eligible employers” until 2029), the effective rate is exceedingly low.  For example, a payroll of $2,000,000 would give rise to less than $20,000 in annual EHT.  Not really enough to keep anyone up at night and definitely not enough to build a fabulous law practice out of!