Tax & Trade Blog

As we initially described here, the Canada Revenue Agency (“CRA”) continues auditing and assessing individual home-owners who have either substantially re-built their homes or commissioned the construction of a new home for their own use on the resale value of those homes in a number of alarming instances.

In today’s economy, every dollar counts, a sentiment echoed by the Federal government.  It appears that BC Finance also dances to this tune, as the province’s 2024 Budget includes an amendment to the definition of “software” in the BC Provincial Sales Tax Act(“PSTA”), retroactive to April 1, 2013! 

While the amendment is described as “clarifying” the definition, it is difficult not to see it as BC Finance’s response to a recent tax appeal decision from the Supreme Court of British Columbia.

In a “bad news case” for unsecured creditors, the Federal Court has confirmed that the CRA’s deem trusts over things like unpaid GST/HST and income tax source deductions take precedence to prevent loan repayment to unsecured creditors.  This means that related and unrelated persons loaning money to Canadian small businesses on an unsecured basis (which is common - think about the loans being advanced by business partners, parents and spouses) are at risk when those businesses default on their tax obligations.

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.

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.