Principal Issues: [TaxInterpretations translation]
1. Can the penalties under subsections 162(7), 162(7.01) and 167(7.02) be cumulative?
2. From what date will the CRA calculate the penalties if the information returns were filed after the extension date granted under subsection 220(3)?
3. How is the number of information returns calculated for the purposes of subsection 162(7.01)?
Position:
1. Not in respect of 162(7) but possible in respect of 162(7.01) and 167(7.02).
2. The late-filing penalty will be assessed from the original due date if the return is not filed by the end of the extended period.
3. The number of slips and summaries by type of payment must be added together to determine the number of late information returns and, therefore, the applicable penalty.
Reasons: Legislative analysis.
January 5, 2011
Laval TSO Headquarters
Income Tax Rulings Directorate
Compliance Programs Branch
Isabelle Landry, M.Fisc.
450-623-0193
Attention: M. Pierre Lessard,
Large File Manager 2010-038976Application of subsection 162(7.01)
This memo is in response to your email of December 9, 2010 in which you asked us the following questions:
1. Can the penalties under subsections 162(7), 162(7.01) and 167(7.02) of the Income Tax Act (the "Act") be cumulative;
2. From what date will the calculation of penalties for failure to file information returns be made by the Canada Revenue Agency ("CRA") if such returns are filed after the extension date granted by the Minister under subsection 220(3); and
3. How is the number of information returns calculated for the purposes of subsection 162(7.01)?
Unless otherwise indicated, all statutory references herein are to the provisions of the Act.
Our Comments
Subsection 162(7) imposes a penalty on every person (other than a registered charity) who fails to file an information return as and when required by the Act or the Income Tax Regulations (the "Regulations") or that fails to comply with a duty or obligation imposed by the Act or the Regulations. However, that subsection does not apply if another provision of the Act imposes a penalty for such a failure.
Subsection 162(7.01) imposes a penalty on every person, other than a registered charity, who fails to file one or more information returns of a type prescribed, within the time limits provided by the Act or the Regulations. Subsection 162(7.02) imposes a penalty on any person, other than a registered charity, that fails to file one or more information returns of a type prescribed in the manner required. Subsection 162(7.01) deals with the obligation of taxpayers to file one or more information returns within certain time limits, while subsection 162(7.02) deals with the obligation of taxpayers to file one or more information returns in a certain manner (electronic format).
With respect to your first question, it is our view that the penalty under subsection 162(7) cannot be combined with the penalties under subsections 162(7.01) and 162(7.02). However, it is possible to combine the penalties provided for in subsections 162 (7.01) and 162 (7.02) where a taxpayer does not complete one or more information returns within the prescribed time or in the manner (electronic format) required by the Act.
With respect to your second question, we are of the view that the penalties under subsections 162(7.01) and 162(7.02) will be calculated from the expiry of the filing deadline determined under the Act or Regulations for completing a particular information return where that information return is made after the extension date determined by the Minister pursuant to subsection 220(3).
Finally, one of the bases for calculating the penalties under subsections 162(7.01) and 162(7.02) is the number of information returns of a prescribed type. We are of the view that the slips and the related summary(s) are each a separate information return for the same type of payment. Consequently, the number of slips and summary(s) by type of payment must be added together to determine the applicable penalties under subsections 162(7.01) and 162(7.02). For example, a person who fails to complete 1,000 T4 Slips - Statement of Remuneration Paid and 50 T4SUM Summary of Remuneration Paid within the time prescribed by the Act or Regulations would be liable to a penalty under subsection 162(7.01) on a total of 1,050 information returns of the same type.
We hope that our comments are of assistance.
Best regards,
Guy Goulet CA M. Fisc.
Interim Manager
for the Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch.