Tax & Trade Blog

After suspending most audits for the early part of 2020 due to the COVID-19 pandemic, the Canada Revenue Agency (the “CRA”) has been slowly but steadily gearing up its audit activity through 2020 and the first half of 2021. This is expected to continue through the second half of 2022 as the CRA resumes a regular level of audit activity.

While the CRA always has a number of different audit priorities on the go simultaneously, Budget 2021 specifically announced an additional $304.1 million in funding for the CRA spread over five years for, among other things, GST/HST audits of large corporations.

This announcement seems, at least in part, designed to reverse the decline in new corporate audits which recently made headlines when it was reported that new large corporation audits dropped by over 30% from 2016/2017 (6,281 new audits) to 2019/2020 (4,257 new audits).

In Budget 2021 the Government of Canada proposed a “luxury tax” effective January 1, 2022 on sales of certain luxury vehicles – cars/trucks, aircraft, and boats - whose selling price exceed a $100,000 threshold for cars/trucks and aircraft, and a $250,000 threshold for boats. The proposed tax would be the lesser of 20% of the value above the threshold, or 10% of the full value of the luxury vehicle. At the time the government said the luxury tax is expected to raise $604 million over 5 years.

It is not uncommon for the CRA to issue administrative policies or directives that provide CRA auditors and the public with direction on how the Excise Tax Act (ETA) or Income Tax Act (ITA) should be applied to certain industries/situations. While people may believe that following these directives means they are following the law, these directives are simply the CRA's view of how the law should be applied. Accordingly, they can sometimes be a source of false comfort, and not accurately reflect the law. Such was the case in the recent Tax Court of Canada (TCC) decision of Dr. Brian Hurd Dentistry Professional Corporation v. The Queen, 2017 TCC 142 (Brian Hurd) where the Court found the CRA GST policy statement was wrong and misleading.

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.

In Excise and GST/HST News No. 101 the CRA clarified that in its view doctors/dentists and other medical practitioners must charge GST/HST on their on-call fees. 

Over the past several years, the CRA Audit Division has directed more attention to businesses that use Employment Agencies for their staffing needs.  If your business deals with Employment Agencies, Temporary Labour, Staffing Agencies, or other similar entities, consider consulting us for strategies on safeguarding your ITCs.

The CRA has a mandate to improve compliance of GST/HST registrants and to encourage GST/HST registrants to meet their filing requirements.  As part of its commitment to this mandate, the CRA will be implementing changes to its current processes.