webtip

Political Activities Review – Over

The Minister of National Revenue Diane Lebouthillier has announced the winding down of the review by CRA of registered charities political activities. Throughout the project, 30 audits were completed, 5 resulted in revoked registration but were based primarily on factors beyond their involvement in political activities. The 24 audits underway at the time of the announcement on January 20, 2016, will continue, but no other entities will be reviewed under this project.

For further information see VTN Monthly Tax Update Seminar, Issue No. 415

Travel Information – Government Information and Advisories

The Government of Canada provides online travel information at www.travel.gc.ca to over 220 nations worldwide. It provides country-by-country information and advice on security, entry and exit information, health, laws and culture, natural disasters and climate, and assistance while travelling in the respective countries.

It addition, it publishes travel advisories for Canadians travelling and living abroad. These advisories are updated nearly daily. The website also notes that if the country an individual is visiting is subject to a travel advisory, travel health insurance or trip cancellation insurance may be affected.

For further information see VTN Monthly Tax Update Seminar, Issue No. 415

REQUIREMENT TO PROVIDE ACCOUNTING INFORMATION TO CRA

In an October 30, 2015 Federal Court case (M.N.R. vs. Amdoc Canadian Managed Services Inc., T-1018-15), the Minister applied for an Order (Section 231.7) requiring the taxpayer to provide the Minister with any access, assistance, information and documents available under Section 231.1 with respect to a transfer pricing audit, domestic audit, and a foreign accrual property income audit.


CRA issued 16 queries to the taxpayer. The taxpayer did not respond to three queries, explaining that the information was not within its possession, power or control.

Taxpayer wins
The Court noted that the taxpayer did not possess nor have the power to acquire the information requested by the Minister, even if it existed elsewhere. The Tax Act does not contemplate the creation of records where they do not exist; that which does not exist cannot be produced.

For further information see VTN Monthly Tax Update Seminar, Issue No. 412

COMBINED AUDITS OF OWNER-MANAGED COMPANIES

In a June 18, 2015 Technical Interpretation (2015-0572151C6, Bogdan, John), CRA was asked about the perceived increase in requests of personal financial information of the shareholders of Canadian corporations selected for audit. Further, questions were asked with respect to information that is requested in relation to the shareholder’s spouse, children or other related parties. In some situations, the shareholders are asked to essentially complete statements of net worth.


CRA noted that the personal information from the shareholder and related parties is requested to ensure that business transactions are reported within the business and not in personal accounts. It was noted that internal controls and the segregation of duties are generally weak for such organizations. Therefore, indirect tests of income may be used to ensure the completeness of income reported. Indirect tests may include:

 

  • bank deposit analysis;
  • rough net worth calculations; and
  • analysis of sources and applications of funds.

For further information see VTN Monthly Tax Update Seminar, Issue No. 412