Canada Tax Agency Announces Rule Changes For Business

by Mike Godfrey, Tax-News.com, Washington

26 December 2006

The Canadian Revenue Agency has advised businesses that legislative changes introduced in 2006 to simplify tax compliance will become effective on January 1, 2007.

The changes seek to harmonize various accounting, penalty and interest provisions of the federal acts administered by the Canada Revenue Agency (CRA), such as the Excise Tax Act (ETA), the Income Tax Act (ITA), the Excise Act, 2001, and the Air Travellers Security Charge Act (ATSCA).

Under the new rules, a penalty will be charged if a company's GST/HST return is filed late. This penalty is equal to 1% of the amount unpaid or outstanding for the reporting period as of the return due date, plus 0.25% of the overdue amount times the number of complete months the return was overdue, to a maximum of 12 months.

Companies expecting a refund after filing their GST/HST return or a rebate application will receive the refund or rebate amount only if they have filed all returns for all of their applicable business program accounts required under the ETA, the ITA, the Excise Act, 2001, and the ATSCA.

Firms that owe amounts under the ETA, the ITA, the Excise Act, 2001, or the ATSCA, will have their refund or rebate used automatically to offset the other debt.

The prescribed interest rate paid on a refund of net tax or on a rebate of GST/HST will be the basic rate, plus 2%. The prescribed interest rate charged on an overdue amount will be the basic rate, plus 4%. The basic rate is based on the rate charged on 90-day Treasury Bills, adjusted quarterly, and rounded up to the nearest whole percentage (expressed as a percentage per year). This replaces the 6% late remitting penalty.

Interest on a refund of net tax and overpayment will be paid beginning 30 days after the later of: the day the return is filed; and the day after the end of your reporting period.

In the case of rebates, interest will be paid beginning on the day that is 30 days after the application in which the rebate claim is filed and ending on the day the rebate is paid.

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