The taxpayer was assessed under s. 215(6) for failure to withhold and remit Part XIII tax on rents paid by it in its 2011 to 2016 taxation years to its lessor, Ms. Trimarchi, who lived in Italy. St-Hilaire J stated that “subsection 215(6) is devoid of any requirement that the payer have knowledge that the payee is a non-resident” Although the taxpayer was able to point to some minor indicators suggestive of Canadian residence of Ms. Trimarchi (e.g., a Canadian bank account to receive the rent payments, a Canadian SIN, and a Montreal address shown on some documents), the preponderance of the evidence (presented by the Crown, even though the onus was not on it) suggested that Ms. Trimarchi was a non-resident.
Regarding the penalty imposed under s. 227(8), she agreed that a due diligence defence was available, but stated (at para. 43):
The courts have found that to be successful in mounting a defence to the imposition of a penalty, it is expected that the taxpayer seeking to invoke a due diligence defence must show that they exercised a high degree of diligence to comply with their obligations under the Act (see for example, Ogden Palladium ... .). In the circumstances of this case, the Appellant took no steps to ensure compliance with its withholding obligations. Counsel submitted that the Appellant was justified in not taking steps to ensure compliance because it had no reason to believe that Sebastiana Trimarchi was a non-resident. Unfortunately, that is not enough to meet the standard of a high degree of diligence. I therefore find that the Minister was justified in assessing the penalty pursuant to section 227(8) … .