Principal Issues: Whether the denial of the dividend refund can be disputed upon the receipt of a nil assessment.
Position: Yes.
Reasons: Subsection 152(1.2) provides for the ability to object to the determination that no dividend refund is payable.
XXXXXXXXXX 2011-042075 Terry Young 613-957-8283
March 6, 2012
Dear XXXXXXXXXX :
Re: Ability to Dispute the Denial of a Dividend Refund where a Nil Assessment
We are replying to your email of September 12, 2011, concerning the ability to dispute the denial of a dividend refund upon the receipt of a notice that no tax is payable under subsection 152(1) of the Income Tax Act (the "Act"), commonly referred to as a "nil assessment". We apologize for the delay in responding.
You have described a situation involving a taxpayer who received a nil assessment that also indicated that the taxpayer had been denied a dividend refund under subsection 129(1) of the Act. You have asked whether the taxpayer can file a notice of objection in respect of the denial of the dividend refund.
Subsection 152(1) states, in part, that the Minister shall assess a taxpayer's tax and any interest and penalties, if any, payable. Paragraph 152(1)(a) states that the Minister shall determine the amount of any refund under section 129. Notwithstanding the fact that a taxpayer cannot object to a nil assessment, whether a taxpayer can object to a denial of a dividend refund pursuant to section 129 is a separate issue.
Subsection 152(1.2) states that Division I, which includes the provisions governing the filing of a notice of objection, and Division J apply to amounts determined under Division I with any modifications that the circumstances require. It is our view that this would include a determination of a refund under section 129 made pursuant to subsection 152(1), even if the amount of the refund were nil.
Accordingly, a taxpayer that receives a notification that the Minister has determined that no refund is payable under section 129 may file a notice of objection to that determination. The objection may be filed even if the determination is included on a nil assessment. Please note that this does not in any way imply that the taxpayer may object to the nil assessment itself. As stated above, a taxpayer cannot object to a nil assessment.
We trust that our comments will be of assistance.
Yours truly,
Terry Young, CA
For Director
International Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch