Justice John Owen of the Tax Court of Canada has rendered one of the most important and potentially far-reaching decisions in 33 years of GST. While Fiera Foods Company v. The King, 2023 TCC 140 is about some other things, the Tax Court’s keen observations about GST “Information Requirements” is its most important part: they require sufficient evidence to be obtained prior to claiming input tax credits (“ITCs”), but do not specify or require the “form” of that evidence.
Tax & Trade Blog
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Carousel Schemes: Don't Let CRA Take You for a Ride!
It seems that the only thing hotter than inflation these days is CRA’s auditing and assessments in missing traders, carousel schemes and shams. Affected industries so far include telecom, gold and precious metals, diamonds and precious gems – and eve
Recent blog posts
On September 14, 2023 the Prime Minister announced upcoming legislation to remove the Goods and Services Tax (GST) on the construction of new apartment buildings.
The announcement also called on the provinces participating in the Harmonized Sales Tax (HST), or that impose their own provincial sales tax, to match the federal government’s rebate. In a twitter post the Ontario Minister of Finance has already indicated they will “work closely with Ottawa to do the same when it comes to Ontario’s portion of the HST.”
While the government of Canada appears focused on the political hot potato that is our residential housing industry, announcing new rules for rental houses are coming, the CRA is headed in the other direction, apparently targeting residential home-owners that have recently sold their homes, on the basis that the degree to which they fixed them up prior to sale caused the homes to become “new homes” and subject to full GST/HST on their fair market value.
The CITT recently announced an Expiry Review of its Order on Seamless Carbon or Alloy Steel Oil & Gas Well Casing from China.
What is an Expiry Review
Expiry reviews are conducted jointly by the Canada Border Services Agency (“CBSA”) and the Canadian International Trade Tribunal (“CITT”) to review prior Anti-Dumping Duty (“ADD”) or Countervailing Duty (“CVD”) orders made by the CITT (“Orders”) under the Special Import Measures Act (“SIMA”). They generally occur every five years following the original Order or subsequent renewal.
In Ghermezian v. MNR, 2023 FCA 183, the Federal Court of Appeal may have put the last nail in the coffin for taxpayers trying to dispute the broad reach of the CRA’s audit powers.
CRA’s Use of 3rd Party Requests for Information
The case revolved around the CRA’s Related Party Initiative, and the CRA’s issuance of various requests and requirements for information under section 231.1 of the Income Tax Act (and parallel provisions in section 289 of the Excise Tax Act (alternatively, the “RFIs” and the “Demands”, and the “ITA” and “ETA”).
As we blogged about here, in late 2022, Newfoundland and Labrador introduced a tax on sugar sweetened beverages (the “SSBT”). An often-overlooked aspect of Canadian indirect and excise taxes is the ability for certain taxes to compound, so that one pays a “tax on a tax”. This issue is particularly pronounced when supplies are subject to both GST/HST and a provincial excise tax.
A recent issue of the CRA Excise and GST/HST News clarified that the GST/HST is calculated on the total value of consideration including the SSBT and serves as an example of why it is important to consider how taxes interact in practice.
As we have blogged about a fewtimes in the past, corporate tax debts are unlike other forms of liability and can pose special challenges for directors and shareholders of corporations that have unmet tax obligations. This can lead to dreaded director’s liability and third-party assessments, which allow the CRA to effectively “pierce the veil” and go after individuals or other businesses that would otherwise be protected by the screen of limited corporate liability.
A recent decision at the Tax Court of Canada considered this issue, serving as a reminder to businesses and their owners that these debts are not so easily ignored.
As discussed here and here, Canada has one of the most protectionist agricultural product sectors in the world. Indeed, we have import restrictions and incredibly high tariffs on many basic groceries like cheese, eggs and poultry – all leading to fuel inflation in Canada today, and continuing disputes with countries like the US and New Zealand over our protectionist approach.
This affects consumer and commercial importers of these products, with our current government enforcing import restrictions through tariff rate quotas (“TRQs”).
On July 20, 2023, the Canada Border Services Agency (“CBSA”) released a notice that it made a preliminary determination of dumping and subsidy in respect of certain wind towers originating in, or exported from, the People’s Republic of China – resulting in the application of provisional duties on imports of those Subject Goods!
Further to CBSA’s determination, on July 21, 2023, the Canadian International Trade Tribunal (“CITT”) released a notice that it is initiating its final inquiry to determine whether the dumping and subsidizing of the Subject Goods has caused, or is threatening to cause, injury to the Canadian domestic industry.
Anyone wishing to participate in the CITT inquiry and hearing must file a Notice by August 4, 2023.
On July 5, 2023, the Canadian International Trade Tribunal (“CITT”) issed a preliminary determination of injury in respect of certain wind towers from China. The wind towers investigative process now moves back to CBSA, which will make a preliminary determination of its own by August 5, 2023 regarding dumping or subsidy – which can then result in the imposition of provisional duties!
On April 21, 2023, the Canada Border Services Agency (“CBSA”) released a notice that it was initiating investigations under the Special Import Measures Act into the alleged dumping and subsidizing of certain wind towers from China. The investigation was initiated following a complaint by Marmen Inc. and Marmen Énergie Inc., from Trois-Rivières, Québec.
When you are a boutique Canadian law firm practising in a niche area like Indirect Tax, Customs and International Trade, AND you get multiple inquiries from multiple clients with the same problem, you KNOW something is up!
We have been getting a lot of recent inquiries about machinery being seized or held up at the Canadian border on the basis that it is “tobacco manufacturing equipment”.
As a boutique Canadian law firm practising in a niche area (we focus on Indirect Tax, Customs and International Trade matters) we often get inquiries from small businesses and even travellers seeking to appeal various tax assessments, customs infractions, seizures and the like.
The most basic question we are asked is “how can I appeal this?”.
Another question that we are often asked is what the CRA means by the term “carousel scheme”. It is a great question, because the CRA does not define its position on that phrase anywhere, other than in private assessment documents that it sometimes provides to GST registered persons on the wrong end of the CRA’s Notices of Assessment powers.
According to the CRA, and in its simplest form:
We are often asked about “accommodation invoices”, and what the CRA is talking about when speaking about these types of invoices.
This is predominantly a term that is used in the GST context but is not defined anywhere in the Excise Tax Act (i.e., the GST legislation) or relatively speaking anywhere in any published CRA administrative document.
But CRA does disclose what it means by “Accommodation Invoices” when it comes time to assess wary taxpayers:
On June 2, 2023, Canada Border Services Agency (“CBSA”) released a notice that it was starting a scope proceeding in respect of carbon steel fasteners originating in or exported from China or Taiwan. The proceeding was initiated by a potential importer, and will confirm whether CAMO Edge Screws are subject to the existing Canadian International Trade Tribunal (“CITT”) anti-dumping Order. The final decision and Statement of Reasons should be available by September 29, 2023.
A common misconception when it comes to oil and gas trading with Canada is that, for GST/HST purposes, there will never be any obligations on foreign sellers selling on a DAP basis.* This is not true, and there can indeed by GST/HST collection and remittance obligations on US and international sellers, if certain conditions are met.
To understand why these misconceptions exist, one needs a deeper appreciation of the Canadian GST/HST legislation, found in Part IX of the Excise Tax Act(“ETA”), and also to get deep into the mindset of the Canada Revenue Agency (“CRA”), which administers the ETA and enforces GST/HST compliance.
On May 27, 2023, the Canada Border Services Agency (“CBSA”) released long-anticipated draft amendments to the Value for Duty Regulations under the Customs Act.
The proposed changes may have major implications for how most goods are imported to Canada are valued and change how the terms “sold for export to Canada” and “purchaser in Canada” are defined – two bedrock definitions under the “Transaction Value” method.
These changes will likely have significant financial consequences for many importers, and for non-resident importers (“NRIs”) specifically!
The Consultation Period on these draft regulations closes June 26, 2023.
An often-overlooked aspect of Canadian indirect tax is the degree to which provincial fuel and carbon tax statutes vary across the country — and the surprising and significant consequences for non-resident businesses with limited connections to Canada.
US and international petroleum traders selling fuel into Canada present a good example of the complexities in this area, and how the rules can vary substantially from province-to-province leading to unforeseen registration, licensing, and Fuel Tax collection requirements!
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.”