CRA Operational Update: Ten Things You Need To Know – Tax

(“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

1. 1. Notices of Objection
      1. 1. 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.
      1. 1. 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.
      1. 1. The CRA’s Appeals division will
            continue accepting supplemental submissions.

1. 1. Reassessments
      1. 1. 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).
      1. 1. 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.

1. 1. Transfer Pricing
      1. 1. 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.
      1. 1. 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).

1. 1. Impending Statute-Barred Dates
      1. 1. Treaty-based limitation periods are
            fixed and as a result meeting them has remained a high
            priority.
      1. 1. 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.

1. 1. Bill C-17, An Act respecting
      additional COVID-19 measures
      1. 1. 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.
      1. 1. 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.
      1. 1. 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.

1. 1. Late-filed Elections, Designations
      and Objections
      1. 1. 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.

1. 1. Taxpayer Relief
      1. 1. 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.
      1. 1. 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.
      1. 1. The CRA anticipates a deluge of
            relief requests and recommends filing them online to help expedite
            review and results.

1. 1. Voluntary Disclosures Program
      (“VDP“)
      1. 1. 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.

1. 1. Taxpayer Communications
      1. 1. 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.
      1. 1. 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.
      1. 1. 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.
      1. 1. Regular mail of course remains an
            option as mailrooms become increasingly operational, although
            perhaps less timely.

1. 1. Requirements for Information
      (“RFI“) and Audits
      1. 1. 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.
      1. 1. The CRA plans to be accommodating
            with the timing for complying with 30 day letters, unless a
            taxation year may imminently become statute-barred.

Footnote

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.

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