Tax Limitation and Appeal Periods Extended

As part of the government’s ongoing response to the pandemic, draft legislation was proposed on May 19, 2020, to extend limitation periods and appeal deadlines related to tax reassessments and disputes. Similarly, the Tax Court of Canada further extended its closure period.

Limitation Periods Extended

Under the Income Tax Act and the Excise Tax Act, the Canada Revenue Agency (the “CRA”) can normally reassess a taxpayer within three years (or longer depending on the taxpayer or provision at issue) following the date of the original assessment for income tax, or four years following the date that the GST/HST return was filed.

Once the limitation period expires, the period at issue is considered “statute barred” and the CRA is generally prevented from reassessing unless they can establish that, among other things, the taxpayer made a negligent misrepresentation or committed fraud.

Under the proposed legislation, limitation periods are extended for a six-month period from March 13, 2020. The practical consequence is that limitation periods that otherwise would have expired between March 13, 2020 and September 13, 2020 will not go statute-barred until at least September 14, 2020. The Minister of National Revenue has until September 30, 2020 to provide notice to the public that the limitation periods will be extended, which we anticipate will occur once the legislation is passed.

The proposed legislation can be found here.

Appeal Timelines Extended

On a more helpful note to taxpayers, the timelines for appealing to the Tax Court and Federal Court of Appeal are also extended under the proposed legislation. Usually, after a taxpayer has objected to a reassessment, the taxpayer has 90 days to appeal a decision from the CRA’s Appeals Division to the Tax Court. Similarly, the taxpayer has 30 days following a judgment of the Tax Court to appeal to the Federal Court of Appeal.

The proposed legislation would suspend these appeal deadlines for the period between March 13 and September 13, 2020, effectively extending the time to appeal. While the federal cabinet retains the discretion (up until September 30, 2020) to lift or abridge the suspensions, we anticipate that appeal deadlines will be extended until at least September 14, 2020.

Tax Court Closure and Timelines Extended

The Tax Court has been closed since March 16, 2020. The notice issued on May 20, 2020 provides that the Tax Court closure (including all hearings) will be extended until at least July 3, 2020, which simultaneously suspends the computation of all litigation timelines within its jurisdiction. The Tax Court will continue to monitor the situation and we anticipate further extensions of the closure.

For more information, please contact Louise Summerhill, Neil Bass, Angelo Gentile or David Malach, or a member of our Tax Group