Tax & Trade Blog

The determination of whether a transaction is a ‘sham’ has been a longstanding issue in tax law, but one that has seemingly been the focus of a number of CRA projects across a number of different industries, including a current project in the international long-distance minutes business, where the CRA says that businesses are involved in the so-called carousel sham!

On Monday, November 30, 2020, the Government of Canada delivered its Fall Economic Update, entitled Supporting Canadians and Fighting COVID-19. As reported in the National Post, the Update will be particularly noteworthy for online businesses selling goods/services to Canadians, as it announced that the government would soon “force foreign digital vendors like Netflix and Amazon to collect sales taxes on a bevy of products and services sold to Canadians”.

The tax measures cover a variety of online services, from streaming platforms to short-term rental accommodations, and are expected to be in effect Canada-wide for GST/HST purposes by July 21, 2021.

When it comes to the payment on taxes for goods sold on-reserve, Canadian First Nations Persons enjoy a special tax status.  Section 87 of the federal Indian Act provides that First Nations persons are not liable to taxation in respect of their personal property on reserve:

87 (1) Notwithstanding any other Act of Parliament or any Act of the legislature of a province, but subject to section 83 and section 5 of the First Nations Fiscal and Statistical Management Act, the following property is exempt from taxation:

(a) the interest of an Indian or a band in reserve lands or surrendered lands; and

(b) the personal property of an Indian or a band situated on a reserve.

This special status is reflected in both federal and provincial taxation measures.

In the current global business environment, increasingly many US companies are selling their goods into Canada, and using a variety of business structures to do so.  However, many companies continue to struggle with their tax and customs obligations on these transactions.  In particular, issues often arise with determining the proper value for duty of the goods at the border, and companies are often further confused between their Division II and Division III GST/HST obligations under Canada’s Excise Tax Act.

One of the emerging areas in criminal law in the 21^st century are the rules that surround the search and seizure of electronic devices like computers, notebooks and smartphones – particularly where those devices contain information covered by Solicitor-Client Privilege.

When the CRA executes a Search Warrant in the tax consequence, and seizes electronic storage devices like a notebook or an iPhone, the party subject to the Warrant may still rely on a claim of Solicitor-Client Privilege. This results in a unique court process which deals with how to isolate privileged documents that are otherwise stored in the device alongside non-privileged ones.

A recent case before British Columbia Supreme Court dealt with this issue, and is a good read for persons finding themselves subject to such a seizure.