Principal Issues: [TaxInterpretations translation] What are the differences between these various penalties? What are they aimed at?
Position: 162(7) applies to a person who fails to file an information return. 162(7.01) is directed at a person who files an information return late and 162(7.02) is directed at a person who fails to comply with the form and format for filing an information return.
Reasons: Income Tax Act.
November 30, 2009
Aggressive Tax Planning Division Headquarters Income Tax Rulings Directorate Attention: Michel McFadden Nancy Turgeon, CGA
2009-034405
Interpretation of subsections 162(7), (7.01) and (7.02) of the Income Tax Act
This is further to your e-mail of September 10, 2009 in which you asked for our opinion on the application of the above subsections.
Unless otherwise indicated, all statutory references herein are to the provisions of the Income Tax Act (the "Act").
Specifically, you wish to know if the T5003 "Tax Shelter Information" return and the T5003 "Statement of Tax Shelter Information" slips are considered to be separate information returns and, if so, whether it is reasonable to believe that subsection 162(7) applies to the T5003 summary return while subsection 162(7.01) applies to the slips.
Furthermore, you wish to know how the application of subsections 162(7) and (7.01) differs from each other.
Our Comments
Although the T5003 "Tax Shelter Information Return" and the T5003 "Statement of Tax Shelter Information" slips are considered interdependent, we have previously issued an Interpretation (endnote 1) that each summary and slip is a separate information return.
Subsection 162(7), as currently in force, imposes a penalty on any person, other than a registered charity, that fails to file information returns required under the Act or the Income Tax Regulations ("Regulations") on time and in the prescribed manner or fails to comply with an obligation imposed by the Act or Regulations. This subsection therefore applies, inter alia, to taxpayers who fail to file information returns.
Subsection 162(7.01), effective for returns required to be filed after 2009, will seek to penalize a person, other than a registered charity, that fails to file one or more information returns within the prescribed time limit, i.e., late. Subsection 162(7.02), also effective for returns required to be filed after 2009, will deal with the procedures for the filing of prescribed information returns.
The current version of section 205.1 of the Income Tax Regulations requires that information returns under subsections 162(7) and 162(8), if more than 500 information returns are filed in a calendar year, be filed in electronic format. This section will be amended to reduce the number of a particular type of information return that a taxpayer may file before being required to file those returns electronically under a current tax provision from 500 to 50. Where a taxpayer is required to file electronically, the following formats are available: CD, DVD or diskette files that can be transmitted using the protocol (XML). The purpose of this subsection is to ensure that taxpayers file their information returns in the correct format.
It is our understanding that the above subsections apply to both the T5003 summary returns and the T5003 slips as each is a separate information return.
Access to Information
For your information, unless exempted, a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Canada Revenue Agency's electronic library. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, the electronic library version can be provided. Alternatively, the client may request a severed copy using the Privacy Act criteria, which does not remove client identity. Requests for this latter version should be made by you to Ms. Jackie Page at (819) 994-2898. A copy will be sent to you for delivery to the client.
We hope that these comments are of assistance.
François Bordeleau, LL.B.
Manager
Business and Partnerships Section
Business and Partnerships Division
Income Tax Rulings Directorate.
ENDNOTES
1 Interpretation E2000-0055637