Principal Issues: Whether subsection 164(1.5) of the Income Tax Act allows a refund of the refundable tax credits under subsection 5(1) of the Manitoba Income Tax Act or the refundable sales tax credit under subsection 8(1) of the British Columbia Income Tax Act for a particular taxation year, where an individual’s return of income is filed three years after the end of the particular taxation year.
Position: No.
Reasons: Subsection 8(2) of the British Columbia Income Tax Act requires that the individual file his/her return of income and the form to claim the credit within three years after the end of the taxation year. Similarly, in order for an individual to be eligible for the refundable tax credits under subsection 5(1) of the Manitoba Income Tax Act, subsection 5(4) requires that the amount is claimed in the individual’s return for the year and the return for the year is filed within three years after the end of the taxation year. The specific filing requirements provided by the provincial legislation are not overridden by the federal provisions.
XXXXXXXXXX G. Godson 2017-069978 December 11, 2017
Dear XXXXXXXXXX:
Re: Refund - Provincial tax credit
This letter is in response to your email of April 20, 2017, in which you are seeking our view on whether subsection 164(1.5) of the Income Tax Act (the “Federal Act”) permits a refund of the refundable sales tax credit referred to in section 8 of the British Columbia Income Tax Act (the “BC Act”) and the refundable credits referred to in section 5 of the Manitoba Income Tax Act (the “Manitoba Act”), where an individual’s return of income is filed beyond three years from the end of a particular taxation year.
In particular, you note that each of the BC Act and Manitoba Act provide that subsection 164(1.5) of the Federal Act applies to each respective statute, and therefore you suggest that the Minister may refund to an individual such provincial tax credits within ten calendar years from the end of the particular year, despite the fact that the individual taxpayer’s return of income was filed beyond three years from the end of the particular year, but within ten years.
Our Comments
This technical interpretation provides general comments about the provisions of the Federal Act and related legislation. It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R7, Advance Income Tax Rulings and Technical Interpretations.
Generally, under subsection 164(1) of the Federal Act, no refund of an overpayment will be issued where the taxpayer’s return of income for a taxation year has not been made within three years from the end of the year. However, under paragraph 164(1.5)(a) the Minister may refund an overpayment to an individual for a taxation year beyond the three year period referred to in subsection 164(1) on or after mailing a notice of assessment for the taxation year where a return of income is filed within ten years after the end of the taxation year.
Information Circular IC 07-1R1 Taxpayer Relief Provisions states that if there are time limitations to claim certain provincial benefits or credits stipulated in a provincial taxation act (which is administered by the Canada Revenue Agency for certain provinces), subsection 152(4.2) and paragraph 164(1.5)(a) do not override provincial limitations, unless provincial law allows for it.
British Columbia Sales Tax Credit
In order for an eligible individual to be entitled to the British Columbia Sales Tax Credit, subsection 8(2) of the BC Act specifically requires that the individual file his/her return of income and the form to claim the credit (i.e. BC479) within three years after the end of the taxation year. Moreover, pursuant to subsection 8(5) of the BC Act, an eligible individual who is entitled to a British Columbia Sales Tax Credit is deemed to have paid, at the end of the taxation year on account of the individual’s tax under the BC Act an amount equal to the sales tax credit.
Subsection 40(1) of the BC Act provides for a refund of an overpayment if a taxpayer’s return of income for a taxation year has been made within 3 years from the end of the year. Subsection 40(1.1) provides that subsection 164(1)(b) to (1.31) and (1.5) to (7) of the Federal Act applies for the purposes of the BC Act.
Although it is acknowledged that subsection 164(1.5)(a) of the Federal Act applies for the purposes of the BC Act where appropriate, in our view the specific filing requirement provided under subsection 8(2) of the BC Act prevails over the general provisions referred to in subsection 40(1.1) of the BC Act. Therefore, in our view, where an individual has not met the required filing obligation under subsection 8(2) of the BC Act with respect to the British Columbia Sales Tax Credit, the individual forfeits his or her entitlement to this credit.
Manitoba refundable tax credit
Section 5 of the Manitoba Act provides for refundable tax credits available to individuals. In that regard, under subsection 5(4) of the Manitoba Act, no amount may be claimed by an individual for a taxation year unless the individual files a return of income for the year claiming the amount of the refundable tax credit and the return of income is filed within three years after the end of the taxation year.
Subsection 28.1(1) of the Manitoba Act provides that application of subsections 164(1) to (1.31), (1.5), (2.01) and (3) to (7) of the Federal Act apply for the purposes of the Manitoba Act. However, in our view the specific filing requirement of a return of income under subsection 5(4) of the Manitoba Act prevails over the general provisions referred to in subsection 28.1(1) of the Manitoba Act with respect to this particular credit. Accordingly, where an individual has not met the filing requirement under subsection 5(4) of the Manitoba Act, the individual forfeits his or her entitlement to this refundable tax credit.
We trust these comments will be of assistance.
Yours truly,
Bob Naufal
Manager
Administrative Law Section
International Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch