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Filing a Tax Review Appeal With the Tax Court of Canada

When a Canadian taxpayer has a disagreement with the Canada Revenue Agency (“CRA”), the first step they need to take is to file a Notice of Objection and attempt to have decision reviewed by CRA appeals officers. When submissions to the Appeals Officer are unsuccessful, the only recourse left for a taxpayer is to appeal to the Tax Court of Canada.

The Tax Court of Canada is a specialized court in Canada that has exclusive jurisdiction over legal tax matters. The Tax Court is the body of court or competition jurisdiction to handle all tax court appeals and tax reviews.

The Tax Court of Canada has the jurisdiction to hear a wide variety of appeals under several statutes such as the Excise Tax Act, the Employment Insurance Act, the Excise Act and the Customs Act. For most Canadians, the jurisdiction that is most relevant is of course the Income Tax Court’s jurisdiction to hear tax appeals arising from disputes with the Canadian tax department under the Income Tax Act.

In fact, the Tax Court has only three powers granted to it with respect to appeals of assessments and reassessments:

  • The Tax Court of Canada judge may confirm the assessment or reassessment issued by the CRA;
  • The Canada Tax Court judge can vacate the assessment, ordering the CRA to reconsider its decision and issue a reassessment to the taxpayer;
  • The Tax judge may also direct the Minister to reassess the taxpayer in accordance with his or her instructions, based on findings of fact determined at trial.

Essentially, the Tax Court judge is only capable of applying the law as written in the Income Tax Act as interpreted by binding authority of more senior courts. However, there are also several provisions of the Tax Act which allow the CRA to decide whether or not to act, or how to act, in certain situations, usually containing phrases like “the Minister may.”

In order to properly exercise a discretionary power given to them by statute, the Tax Court has to exercise such discretion in considering the specific facts and circumstances of each case. “Extraordinary circumstances” allow the Minister of National Review, acting for the CRA in the TCC, the discretion to offer the taxpayer interest or penalty relief, based on the following:

  •  natural or man-made disasters, such as floor or fire;
  • civil disturbances or disruptions in services, such as a postal strike;
  • a serious illness or accident; or
  • serious mental illness or distress, such as death in the immediate family.

Appeals to the Tax Court

A Notice of Appeal to the Tax Court of Canada must be filed within 90 days from the date of the issuance of the Notice of Assessment. If you miss this deadline, there are mechanisms to file an Application for an Extension of Time to allow an additional 12 months to file the Tax Court Appeal.

In order to be successful with the request for an extension of time you must be able to demonstrate the following:

  • That within the appeal period:
    • You could not appeal or have someone else appeal for your; or
    • You intended to appeal;
  • That it would be fair to grant your application;
  • That you applied as soon as you could; and
  • That you have reasonable grounds for appealing.

Two Streams for Appeal–Informal & General

The Tax Court of Canada has two streams available to taxpayers: the informal and the general procedure. The informal procedure is intended to handle lower amounts in dispute (the amount in dispute for each year is $25,000 or less), which is a process similar to the small claims court. If you do not qualify to have your appeal heard under the informal procedure, the TCC will hear said appeal under the general procedure, regardless of the disputed amount.

Informal Procedure

You may qualify to proceed under the Informal Procedure if:

  • The disputed amount of federal tax and penalties does not exceed $25,000 per assessment;
  • The disputed loss amount does not exceed $50,000 per determination or
  • Interest on federal taxes and on penalties is the only matter in dispute.

This procedure is generally more expedient than the General Procedure and the TCC is more flexible in its application of the rules of evidence. It should be noted that the judgment issued under the informal procedure will not be treated as a precedent for other cases.

There is no filing fee for an appeal under this procedure.

General Procedure

The general procedure is far more conducive to promote settlement discussion between the parties as both sides become more familiar with each other’s respective positions.

The litigation steps that must be completed prior to scheduling your matter before the TCC within the General Procedure include:

  • a list and book of documents as material evidence used to advance your position
  • written or oral examinations for discovery, which will allow your lawyer to question the CRA representative with respect to his decisions related to the procedure followed, the evidence reviewed, and whatever else is applicable; and
  • undertakings that came to light during the examination stage that will allow the CRA to become more familiar with your case and increase the potential for settlement.

In both procedures, there is opportunity to settle the matter with the Department of Justice, who are the CRA’s lawyers, before the matter proceeds to trial.

The Federal Court of Canada

A Federal Court judge can tell Revenue Canada how to exercise its discretion if they believe the Minister, acting for the CRA, has made an unreasonable or incorrect ruling. As long as the Minister’s decisions were transparent and within the range of acceptable outcomes, then his decision is not ground for judicial review by the Federal Court of Canada. The Federal Courts will respect discretionary decisions made by Revenue Canada and its delegates as long as decisions are reasonably transparent and not the result of bad faith or fraud.

The remedies that can be asked of and granted by the Federal Court are extremely broad. The Federal Courts have the ability to grant “extraordinary” remedies in the form of prerogative writs, such as injunctions and mandamus orders, and the remedies available are often only limited by the imagination of the Canadian tax appeal lawyer requesting them.

FAQ’s:

If I disagree with the conclusions of the CRA on the notice of assessment, what should I do?
The first thing to do is to file a Notice of Objection. A Notice of Objection is a kind of internal appeal that can be filed with the CRA to dispute the amount of tax levied in a Notice of Assessment or Reassessment. If you disagree with the findings of the CRA to your Notice of Objection, then the last recourse is to file an appeal with the Tax Court of Canada.
What is the Tax Court of Canada?
The Tax Court of Canada is a specialized court in Canada that has exclusive jurisdiction over legal tax matters. The Tax Court is the body of court or competition jurisdiction to handle all tax court appeals and tax reviews. The Tax Court of Canada has the jurisdiction to hear a wide variety of appeals under several statutes such as the Excise Tax Act, the Employment Insurance Act, the Excise Act and the Customs Act. For most Canadians, the jurisdiction that is most relevant is of course the Income Tax Court’s jurisdiction to hear tax appeals arising from disputes with the Canadian tax department under the Income Tax Act.
What powers does the Tax Court of Canada have in terms of tax appeals?
The Tax Court has only three powers granted to it with respect to appeals of assessments and reassessments:
  • The Tax Court of Canada judge may confirm the assessment or reassessment issued by the CRA;
  • The Canada Tax Court judge can vacate the assessment, ordering the CRA to reconsider its decision and issue a reassessment to the taxpayer;
  • The Tax judge may also direct the Minister to reassess the taxpayer in accordance with his or her instructions, based on findings of fact determined at trial.
Where the extraordinary circumstance, the Tax Court of Canada has the discretion of offer the taxpayer interest or penalty relief based on the following:
  •  natural or man-made disasters, such as floor or fire;
  • civil disturbances or disruptions in services, such as a postal strike;
  • a serious illness or accident; or
  • serious mental illness or distress, such as death in the immediate family.
How long do I have to wait after receiving a Notice of Assessment before I can file an appeal with the Tax Court of Canada?

A Notice of Appeal to the Tax Court of Canada must be filed within 90 days from the date of the issuance of the Notice of Assessment. If you miss this deadline, there are mechanisms to file an Application for an Extension of Time to allow an additional 12 months to file the Tax Court Appeal.

In order to be successful with the request for an extension of time you must be able to demonstrate the following:

  • That within the appeal period:
    • You could not appeal or have someone else appeal for your; or
    • You intended to appeal;
  • That it would be fair to grant your application;
  • That you applied as soon as you could; and
  • That you have reasonable grounds for appealing.

Why you Need a Tax Litigation Lawyer

If you disagree with a decision of the CRA or the amount of tax claimed from you, you have rights available to you. You need a strong and experienced tax court lawyer to file a tax review to appeal the decision to the Tax Court of Canada or Federal Court of Canada.

Understanding the unique rules of the Tax Court and the various powers of the Federal Courts is critical for your success. Our tax lawyers will

  • help obtain an extension of time in which to appeal
  • provide you with an opinion on your tax court case
  • help negotiate a settlement for your matter
  • provide representation on all tax court matters

With years of experience in corporate and tax law, our tax court litigators have the knowledge and tools to fight for your interests against the Department of Justice in the Tax Court of Canada as well as the Federal Court.

Have a tax dispute? We’re here to help™.

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