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Subscribe to this list via RSS Blog posts tagged in GST Audit

Over the past several years, the CRA Audit Division has directed more attention to businesses that use Employment Agencies for their staffing needs. We understand that many businesses dealing with Employment Agencies, Temporary Labour, Staffing Agencies, or other similar entities, have already been contacted by CRA Auditors looking to confirm their eligibility for Input Tax Credits (ITCs).

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Whenever a person imports commercial goods into Canada they are required to pay the GST at the border at the time of importation pursuant to Division III of Part IX of the Excise Tax Act (the “ETA”).   This GST rate is currently set at 5%. 

Those who are insufficiently familiar with Canada’s GST/HST system may find themselves treating this tax as a hard cost, or charging the GST/HST to Canadian customers and then keeping it as a form of reimbursement for the tax previously paid at the border.  Neither approach is correct.  

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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.

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For years it was an open question as to whether or not a Canada Revenue Agency ("CRA") auditor owed a duty of care to a taxpayer under audit.  In the recent case of Leroux (2014 BCSC 720) the Supreme Court of British Columbia (BCSC) concluded that, on the facts, the CRA auditors owed a duty of care to the taxpayer.  But what is the appropriate standard of care a CRA auditor must meet to avoid a finding of negligence? 

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The CRA's treatment of "bare trusts" has been problematic from the first days of the GST.

When the GST was first implemented in January 1991, the CRA was initially advising bare trustees of bare trusts (trusts that operating at the behest of their beneficiaries, and where the trustee has no independent authority other than following express directions of the beneficiaries) that it was the bare trustee that was viewed as the supplier for GST purposes, and the person required to register for GST purposes. This position was changed in mid-1992, when the CRA flipping its position, and now advising that bare trustees were not allowed to register, and that the beneficiaries of these bare trusts were the one's required to register.

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The Canada Revenue Agency ("CRA") recently reversed its long standing administrative policy regarding the exempt nature of nursing staffing agencies, taking the position that these services are taxable and not exempt:   see Excise and GST/HST News No. 89 (issued without much fanfare in late Summer 2013).

This effectively decision has effectively reversed the CRA's twenty year old position in GST Memorandum 300-4-2 (Health Care Services, September, 17, 1993) which had previously concluded that these services were all exempt, under section 6 of Part II of Schedule V of the Excise Tax Act.

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