We are writing in reply to your letter of September 13, 1990, wherein you requested our views regarding the interpretation of subparagraph 152(4)(b)(iv) and paragraph 164(3)(d) of the Income Tax Act (the" Act") as they relate to the following hypothetical situation.
A taxpayer, who is a resident of Canada, reported income from sources in a foreign country in his 1984 T1 return and paid Canadian income tax accordingly. During 1990, the taxpayer was advised that he was liable for tax in the foreign country on that income. This was within the six year period referred to in paragraph 152(4)(b) of the Act. Accordingly, the taxpayer filed the required tax return with the foreign country in 1990 and paid the taxes due. Prior to this payment, the taxpayer never paid any income tax to this foreign country.
Our Comments
We will respond to the questions posed in your letter in the order in which they appear.
For purposes of subparagraph 152(4)(b)(iv) of the Act, assuming that liability for the foreign tax is genuine and there are no other relevant facts, it is our opinion that the tax paid by the taxpayer to the foreign country in 1990 would represent "an additional payment ... of any income or profits tax" such that the taxpayer's 1984 income tax return would be open for reassessment to reflect the payment of that tax.
In computing the interest on the resultant refund of 1984 income tax to the taxpayer, it is our opinion that, for purposes of paragraph 164(3)(d) of the Act, "the day the overpayment arose" would be the day the taxpayer filed his 1984 Canadian income tax return.
We would caution that the above comments represent an expression of opinion only, based on the limited information set out in your letter and as such are not binding upon the Department. If you are dealing with a particular case, the matter should be referred to the appropriate District Taxation office.
We trust our comments are of assistance to you.
Yours truly,
for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch