Principal Issues: Can a foreign partnership, for which a T5013 isn't required to be filed by any of the partners, receive a determination under paragraph 152(1.4) from the CRA?
Position: No, the minister cannot issue a determination under 152(1.4) if the filing of a T5013 is not required under Reg. 229.
Reasons: Wording of subparagraphs 152(1.4)(a) and (b).
FEDERAL TAX ROUNDTABLE 5 OCTOBER 2018
2018 APFF CONFERENCE
Question 6
Foreign partnership and Canadian partners
By virtue of section 229 of the Income Tax Regulations (footnote 1), an information return (T5013) does not have to be filed where the partnership does not carry on business in Canada, and is not a Canadian partnership or a SIFT partnership. In certain circumstances, a Canadian partner may therefore be a member of a partnership that does not have to file an information return.
Pursuant to subsection 152(1.4), the Minister may determine the income of a member from a partnership for a fiscal year of the partnership within three years after the later of:
a) the day on or before which a member of a partnership is required under section 229 of the Income Tax Regulations to make an information return;
(b) the day the return is filed.
Question to the CRA
How does CRA apply the statute-barring rules respecting a Canadian partner of a partnership for which no information return under Reg. 229 was required?
CRA Response
By virtue of subsection 152(1.4), the Minister may determine, inter alia, the income of a partnership for the fiscal year of the partnership that is to be included in computing, for a taxation year, the tax payable by one of its members within 3 years after the day that is the later of: the day on or before which a member of a partnership is required under section 229 of the Income Tax Regulations (ITR) to complete a T5013 information return for a fiscal period of the partnership; and the day the return is filed. As you stated in your question, where the partnership is not a Canadian partnership or a SIFT partnership and it does not carry on business in Canada, then its partners will not have an obligation to file a T5013 under ITR section 229.
The long-standing position of the CRA is that the Minister cannot make a determination where the partners of the partnership are not required to file a T5013 under ITR section 229, given that the conditions provided for in paragraphs 152(1.4)(a) and (b) cannot then be satisfied.
However, the Minister could instead make an assessment under the general rules in subsection 152(4) of, where applicable, the tax, interest or penalties to be paid by the Canadian partner for its taxation year. Thus, a Canadian partner who did not declare the partner’s share of the partnership's income could, for instance, be considered to have made a misrepresentation that is attributable to neglect, carelessness or wilful default or to have committed a fraud in filing the return, and the Minister could then assess that taxpayer at any time under subparagraph 152(4)(a)(i).
Yves Grondin
Nicolas Bilodeau
5 October 2018
2018-076877
FOOTNOTES
Due to our system requirements, footnotes contained in the original document are reproduced below:
1 C.R.C., c. 945 (« ITR »).