Tax & Trade Blog

As we blogged about here, here and here, CRA continues to audit telecommunications businesses for possible sham and carousel transactions (i.e., GST fraud).

The alleged fraudulent activities come in many forms, and one auditing efforts seems focussed on suppliers and/or recipients connected to the Iris Technologies Inc. case, winding its way through the Tax Court of Canada (“Iris Technologies”).

Iris Technologies has been in the CRA’s gunsights for a number of years now, and allegedly involved in the fraudulent sale of long distance minutes to individuals and companies in Canada and abroad. CRA’s current focus appears to be on the allegedly fraudulent nature of these sales, seemingly taking the position that if Iris Technologies’ purchases and sales were sham transactions, then so too must be the suppliers and recipients transactions on the other side of Iris Technologies (i.e., those suppliers selling minutes to Iris, and those recipients purchasing minutes from Iris) – many (all?) of whom the CRA may be alleging are part of the same carousel schemes.

Further to our recent blogs here and here, Canada has announced even more measures to isolate Russia on the world stage.

Specifically, Canada joined other G7 nations to impose new Russian sanctions, announced in connection with the G7 Leaders’ Summit today in Hiroshima.

In short, over 70 new sanctions were announced, focussing on people viewed as “supporting Russia’s illegal military action and complicit in human rights violations”.  According to the Prime Minister’s Office, the sanctions target “17 individuals and 18 entities linked to Russian companies that provide military technology and know-how to Russia’s armed forces, family members of listed persons, and members of the Kremlin elite.”

Canada’s federal government recently took the steps necessary to impose significant limits on the manufacture, import and sale of certain single-use plastic goods. While the scope of goods covered by the regulations is relatively limited, importers should be aware of them – and be alerted to the fact that regulation may not stop with these specific goods!

A recent Ontario Court of Appeal case serves as a reminder that legal jurisdiction clauses (also referred to as "forum selection") must use express language if they intend to provide a forum with exclusive jurisdiction to hear contractual disputes.

Section 156 of the Excise Tax Act (the "ETA") provides GST/HST relief in the context of certain supplies between closely related corporations and partnerships, and is amongst the most important provisions in the GST/HST legislation. Recently enacted changes have created quite the buzz around this election, as among other things, it now needs to be filed with the CRA, and that filing needs to be done in early 2015 for it to be effective for 2015 supplies. Here are some helpful details.

With the New Year approaching, GST/HST registrants should be aware of a number of GST/HST compliance requirements for 2015, the more notable of which include as follows.

The Ontario Ministry of Finance has threatened to turn the Ontario cigar industry upside down, by beginning to assess vendors selling cigars and other non-cigarette tobacco to status indians on federal indian reserves, for Ontario provincial tobacco tax (PTT). Previously most industry insiders would have assumed - just from Ontario's acquiescence to wide-spread industry practice of exempting all sales of non-cigarette tobacco sold to Indians that sales of cigars, pipe tobacco and chewing tobacco to status Indians on federal Indian reserves was exempt of PTT.

A recent decision in the Federal Court ends up being a real good lesson for (mostly) all of the bad things that Canadian's can face when tempted to either non-report or undervalue their purchased goods when returning to Canada from abroad - all in the pursuit of saving a few dollars in duties or GST/HST. Indeed, what the CBSA was able to do to ferret out the non-reporting and under-valuation may be surprising to the average Canadian, and the facts of the case itself are probably a good heads up on what can face an importer when lying about his or her purchases.

CBSA Valuation Verifications Target Apparel Imports

The Canada Border Services Agency ("CBSA") publishes a list of its active trade compliance verification priorities twice a year, outlining the industries or goods that it is prioritizing for compliance verification. This year the Canadian Apparel industry has been targeted, and has been issued a spate of Trade Compliance Notification Letters. The five most critical things that Apparel importers need to know before responding to these Notification letters are as follows.

When things go awry in one’s business or personal affairs, taxes often get neglected. The Canada Revenue Agency (CRA) does not forget about these tax obligations, however, and has extensive collections powers available to it, including “directors liability” assessments which can transform corporate tax debts into personal tax debts of the affected directors.

The question that many directors and affected personal taxpayers often ask is whether these personal tax debts can be avoided on personal bankruptcy.

The answer is that “it depends”. Recent case law has been swinging toward forcing substantial payments by bankrupts where there are taxes owing to the CRA, as was seen in a recent British Columbia Supreme Court decision in Re Van Eeuwen [2012] GSTC 142.

Instead of filing a notice of objection, a taxpayer may enter into negotiations with the Canada Revenue Agency (CRA) with the purpose of resolving tax issues in dispute.  When a settlement is reached, the CRA may request the taxpayer to sign a waiver, agreeing to the proposed changes to the assessment and confirming that the taxpayer will not appeal the assessment (made on the agreed terms) to the Tax Court of Canada (TCC).  Such waiver of right is expressly provided for in sections 301(1.6) and 306.1(2) of the Excise Tax Act (ETA) and sections 165(1.2) and 169(2.2) of the Income Tax Act (ITA).

Like any contractual agreements, undue pressure, lack of proper legal advice, or unconscionable bargains may void a settlement agreement. The Federal Court of Appeal (FCA) recently confirmed in Taylor v. The Queen (2012 FCA 148) that a waiver of right to object or appeal an assessment signed by a taxpayer pursuant to a settlement is valid and binding on the taxpayer.