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Canada
circumstances. 57 Taxpayers are also required to pay for the comfort provided by an
advance ruling: hourly fees apply to compensate the CRA for the work conducted on a
taxpayer’s behalf. 58
iii After the transaction
Following the close of a transaction or the end of a taxation period, but before the
initiation of any related audit or enforcement action, taxpayers may make a ‘voluntary
disclosure’ to correct inaccurate or incomplete information previously provided to the
CRA. 59 The benefit of such disclosures is that the taxpayer will be liable for the taxes and
certain interest amounts relating to the prior inaccuracies, but will be saved from civil or
criminal penalties that may otherwise apply. Taxpayers may also seek to file amended tax
returns to correct prior inaccuracies or to take advantage of elective measures that they
did not claim in their original returns. Although the CRA will be obligated to process an
amended tax return in limited circumstances, 60 doing so often depends on the exercise
of administrative discretion which can only be employed within the applicable statutory
reassessment period. 61 It is also possible for taxpayers to obtain a discretionary waiver or
cancellation of interest or penalties in sympathetic circumstances by requesting ‘taxpayer
relief’. 62 Similarly, taxpayers may undertake a transaction only to later realise that
they were mistaken in doing so and that the transaction that was carried out (or the
legal effect of that transaction) differs from what the parties had intended. In such
circumstances, taxpayers may be able to obtain a court order rescinding the transaction
or rectifying the relevant transaction documents so as to carry out their true intentions.
The benefit of such an order is that Canadian tax authorities will be bound to follow
the court’s retroactive ruling as to the nature and legal characteristics of the transaction
in question. 63
57 For example, where an issue is before the courts, where it concerns proposed rather than enacted
legislation or where doing so would require the CRA to opine on foreign law.
58 The fee payable for an advance ruling is currently C$100 for each of the first 10 hours spent in
preparing the ruling and C$155 for each subsequent hour (Canada, S.O.R./2000-322, s. 2).
59 See CRA, Information Circular IC00-1R2, ‘Voluntary Disclosures Program’ (22 October
2007). The voluntary disclosure programme has roots both in statutory provisions and in
administrative practices. Canadian courts are yet to fully define the scope of the CRA’s powers
and obligations in this context.
60 For example, where the taxpayer seeks to carry deductions arising in a subsequent taxation year
back to a prior year (s. 152(6)).
61 CRA, Information Circular IC75-7R3, ‘Reassessment of a Return of Income’ (9 July 1984); see
also note 6.
62 CRA, Information Circular IC07-1, ‘Taxpayer Relief Provisions’ (31 May 2007).
63 Where a particular transaction has multijurisdictional consequences, foreign tax authorities
may also recognise a Canadian court order in certain circumstances.
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