Comments on Canadian regulations on reporting of restricted input tax credits.

March 7, 2011

On March 7, 2011, TEI filed comments with the Canadian Department of Finance and Canada Revenue Agency recommending amendments to the Harmonized Value-added Tax System regulations to make the reporting of restricted input tax credits administrable. The comments were prepared under the aegis of the Institute's Canadian Commodity Tax Committee, whose chair is Kim N. Berjian of Conoco Phillips Canada. Materially contributing to the preparation of the comments were fellow committee members Carol Felepchuk of TD Bank Finance Group, and Michael Willis of Lefarge Canada, Inc. Daniel B. De Jong, TEI Tax Counsel, serves as legal staff liaison to the committee.

This letter follows up on our discussions last December during the Institute's annual liaison meetings with Canada Revenue Agency and the Department of Finance. There, Institute representatives raised the issue of the timing for reporting and applying the rules relating to restricted input tax credits (RITCs). Simply stated, reporting RITCs pursuant to the timeframes required in Harmonized Value-added Tax System Regulations, No. 2 (Regulation) is not possible, and the inability to comply exposes businesses to significant penalties and increased administrative costs. The Institute respectfully submits that, to make the Regulation administrable, it should be amended to allow more time for reporting RITCs. In the meantime, the Institute requests CRA to apply administrative tolerance when auditing the RITCs reported on registrants' returns.

Background

Tax Executives Institute is the preeminent association of business tax executives. The Institute's 7,000 professionals manage the tax affairs of 3,000 of the leading companies in Canada, the United States, Asia, and Europe and must contend daily with the planning and compliance aspects of Canada's business tax laws.

Canadians make up 10 percent of TEI's membership, with our Canadian members belonging to chapters in Vancouver, Calgary, Montreal, and Toronto, which together constitute one of our nine geographic regions. Our non-Canadian members (including those in Europe and Asia) work for companies with substantial activities in Canada. In sum, TEI's membership includes representatives from most major industries including manufacturing, distributing, wholesaling, and retailing; real estate; transportation; financial services; telecommunications; and natural resources (including timber and integrated oil companies). TEI concerns itself...