Author: Igor Kastelyanets

A Notice of Reassessment means the CRA has reviewed a return that was already assessed and changed it – often affecting your tax owing, refund, penalties, and interest. What matters now is doing the right things in the right order – especially before the clock runs out.

Step 1: Do this today (the “don’t-miss-a-deadline” checklist)

1. Find the notice date (the date on the notice).
    This date generally drives your objection deadline. Determine your objection deadline.
2. Identify exactly what changed.
    Compare the reassessed amounts to your original filing (income, deductions, credits, penalties, interest).
3. Pull every CRA letter that led up to this.
    Reassessments often follow a review/audit where the CRA requested documents.
4. Collect your proof.
    Receipts, invoices, contracts, bank records, bookkeeping reports, slips, correspondence—anything that supports your original position.
5. Calendar the objection deadline immediately.
    Make sure that you document your objection deadline and do not miss it.

Step 2: Choose the right path (not every reassessment needs a fight)

A reassessment usually falls into one of these situations:

A) You agree with the change

Pay what’s owed (or set up a payment arrangement). Interest can keep accumulating on balances owing.

B) You disagree (facts misread or law misapplied)

That’s when a Notice of Objection is usually the next step. Objections are for situations where you believe they misinterpreted your facts or applied the law incorrectly.

Step 3: Know the deadline that matters most

Individuals (and graduated rate estates)

Your objection deadline is generally whichever is later:

• 1 year after the tax filing deadline for the return, or
• 90 days from the date of your notice of reassessment.

Corporations

Your objection deadline is generally:

• 90 days from the date of your notice of reassessment.

Missed the deadline?

You may apply for an extension, and the CRA states you can apply up to one year after the objection deadline (and you can apply at the same time as you file your objection).

Step 4: File a Notice of Objection

The CRA’s guidance is straightforward: when you object, you must clearly explain what you’re objecting to and why, and include relevant facts and supporting documentation.

What to include in a strong objection

• The tax year and the Notice of Reassessment you’re objecting to
• The specific items you disagree with (line items/issues)
• A clear explanation of why (facts + law, where relevant)
• The documents that prove your position
• A summary your reviewer can follow quickly

How to file

You can file:

• Online in CRA portals (My Account / My Business Account) using “Register my formal dispute”, and then upload documents through “Submit documents online.”
• Through your authorized representative via Represent a Client
• By mail/fax using Form T400A (Objection – Income Tax Act) or a signed letter with the facts, reasons and the same information that would go into a T400A form.

Step 5: Does interest continue to accrue while you object?

Interest charges continue to accrue while the amount is in dispute. You can pay the amount in dispute to avoid additional interest.

Step 6: What happens after you object?

Once you file, the CRA reviews what you submitted and will either:

• agree (in whole or part) and issue an adjustment/reassessment, or
• disagree and send a notice saying the reassessment/determination was correct

Step 7: If the CRA says “no,” the next step is Tax Court

If you disagree with the CRA’s decision on your objection, you can appeal to the Tax Court of Canada. Generally, you have 90 days from the CRA’s reassessment /determination following your objection to file your appeal.

How far back can the CRA go?

Under the Income Tax Act, the “normal reassessment period” is generally:

• 4 years for a mutual fund trust or a corporation that is not a CCPC, and
• 3 years in most other cases, counted from the day the CRA sent the original assessment (or the original “no tax payable” notification).

The CRA can reassess after that normal period in specific situations – such as where there was a misrepresentation attributable to neglect, carelessness, wilful default, or fraud, or where a waiver was filed.

One more option people miss: relief from penalties and interest

If your main issue is penalties and/or interest (not the underlying tax), you may be able to request taxpayer relief (discretionary, fact-driven). There’s also a 10‑year limitation period for interest relief requests (and related limits for penalties/interest outside the eligible window).

Bottom line

A CRA Notice of Reassessment isn’t the end of the road – but it is a deadline-driven process. If you believe the reassessment is incorrect, the goal is to:

• lock in your deadlines,
• build an evidence-based position, and
• file a clean, timely objection that’s easy for CRA to understand.

If you want help assessing the notice, preparing your objection, or planning next steps (including Tax Court strategy), contact Taxpayer Law today.

You must file a Notice of Objection to dispute an assessment issued by the Canada Revenue Agency (CRA). In Canada, this process applies under both the Income Tax Act (for income tax matters) and the Excise Tax Act (for GST/HST and certain other taxes). The T400A Notice of Objection form is used for income tax objections, while equivalent forms (e.g. GST159 for GST/HST) serve the same purpose under the Excise Tax Act. This comprehensive guide explains the purpose of these forms, when to use them, how to complete and submit an objection, common reasons for objecting, important deadlines and procedures, and practical tips to help you succeed in your objection. It is intended for a general audience seeking guidance to file a Notice of Objection in Canada.

What Is a Notice of Objection and When Should You File One?

Generally, a Notice of Objection is a formal request for the CRA to review and reconsider an assessment or reassessment. You can file an objection if you disagree with any amount of tax, interest, or penalties the CRA has assessed or reassessed. In other words, if you believe the CRA made a mistake in applying tax law or in calculating your return, or if new information could change the outcome, an objection is the way to challenge that result.

• Income Tax Act (T400A) – Under the Income Tax Act, use Form T400A, Notice of Objection – Income Tax Act for income tax disputes. This form is used to object to a Notice of Assessment issued for income tax. Common situations include receiving a reassessment that increases your taxable income or disallows deductions/credits (resulting in more tax owing). Essentially, if you disagree with the CRA’s assessment of your personal or corporate income taxes, you have the right to file an objection.
• Excise Tax Act – GST/HST (GST159) – For GST/HST (Goods and Services Tax / Harmonized Sales Tax) disputes – which fall under Part IX of the Excise Tax Act – the equivalent form is GST159, Notice of Objection (GST/HST). You would file a GST/HST objection if, for example, after a GST/HST audit the CRA assesses you additional GST/HST (perhaps due to unreported sales) or reduces your refund by denying certain input tax credits (ITCs) you claimed. In short, if you think the CRA misinterpreted your business records or applied GST/HST law incorrectly in an assessment, you can object under the Excise Tax Act. (Note: GST/HST is the most common tax under the Excise Tax Act for objections. The Excise Tax Act also covers some other taxes like excise duties and special levies – objections for those non-GST items are filed on Form E413, Notice of Objection (Excise Tax Act). The process is similar, but this guide will focus on income tax and GST/HST scenarios.)

Why file an objection? Filing a Notice of Objection is the first step in the formal dispute resolution process. When you file an objection, the CRA’s Appeals Branch will impartially review the contested assessment. This can result in the CRA vacating or adjusting the assessment if they agree with you, or confirming it if they do not.

How to File a Notice of Objection (T400A or GST159)

Filing an objection involves completing the proper form or writing a letter, providing details about the dispute, and submitting it to the CRA on time. You can file the objection online through CRA portals or by mail/fax. Below are step-by-step instructions:

1. Obtain the correct form: Download the appropriate Notice of Objection form for your situation from the CRA’s website. For income tax matters, use Form T400A – Notice of Objection (Income Tax Act. For GST/HST matters, use Form GST159 – Notice of Objection (GST/HST). (If your objection relates to another excise tax or levy outside GST/HST, use Form E413 for Excise Tax Act objections.)

2. Fill in your identification and assessment details: The form will ask for basic identification and the specifics of the assessment you’re disputing. Provide your name (or business name) and complete mailing address, and a daytime telephone number where you can be reached. Include your relevant tax account number – for example, your Social Insurance Number (SIN) for an individual income tax objection, a Business Number (BN) for a business or GST/HST objection, or a trust account number if applicable. Next, identify the assessment you are objecting to: enter the date of the Notice of Assessment (or Reassessment) and the tax year in question (for income tax). For GST/HST, reference the specific reporting period or the assessment number on the notice (GST notices often cover a quarter or year of filings, or an audit period). Essentially, you want to clearly point the CRA to the exact notice and period that you are disputing.

3. State the reasons for your objection (grounds for dispute): This is the most important part. Explain why you disagree with the assessment and what you believe the correct treatment should be. The form T400A and GST159 provide space for you to write your reasons (and you can attach additional pages if necessary). In your explanation, outline the facts and arguments in detail. Provide supporting details and reference any relevant documentation or sections of law, if known. You should attach copies of documents that support your position. Supporting documents might include receipts, invoices, contracts, bank statements, tax slips, or previously submitted forms – anything that bolsters your case.

4. Ensure the form is signed and dated: If you are filing as an individual, you sign it yourself. If it’s on behalf of a business, trust, or estate, an authorized officer or representative should sign (e.g. a company’s director or an executor of an estate). Unsigned objections may be considered invalid. If someone (like your accountant or lawyer) is preparing the objection for you, you still need to sign it or have authorized them via CRA’s representative forms.

5. Complete any additional requirements if applicable: Certain taxpayers have extra requirements for objections:

• If you are a large corporation for income tax purposes, your Notice of Objection must “reasonably describe each issue” in dispute, specify the relief sought for each issue (e.g. how much you believe your income or tax should be changed), and provide the facts and reasons for each issue. A “large corporation” is generally one with over $10 million in taxable capital employed in Canada.
• Under the Excise Tax Act, similarly, if you are a specified type of large business (called a “specified person” under GST/HST rules, generally very large GST registrants or certain financial institutions), you must include a description of each issue, the amount of relief sought for each, and the facts and reasons for each in your GST/HST objection.

6. Submit the objection to the CRA: After completing the form (and attaching any extra pages or documents), you need to send it to the CRA’s Appeals Intake for processing. There are two main submission methods:

• Electronic submission (online): This is often the fastest and most traceable method. Log in to the CRA’s secure online portal – use My Account for individuals or My Business Account for business and GST filings. In the portal, look for the option to “Register my formal dispute (Notice of Objection)”. (If you work with a tax representative, they can use the Represent a Client portal to do this on your behalf .) The online system will prompt you to select the relevant account and assessment and allow you to input your objection details (you can typically upload a PDF of a completed T400A/GST159 or just fill in the fields online). When you submit an e-objection, the system immediately confirms receipt and gives you a case number, which is proof that your objection was filed on a certain date. Keep this confirmation number for your records. You can also upload your supporting documents electronically and they will be attached to your case. If you have additional documents after filing, you can use the CRA’s “Submit Documents” online service with your case number to send them in. Filing online ensures the CRA receives your objection instantly and can start processing it sooner.
• Mail or Fax (paper submission): If you prefer or need to file by paper, you can mail or fax your completed Form T400A or GST159 (or a signed letter containing all the same information) to the CRA. Objections by mail/fax should be sent to the Chief of Appeals at the appropriate Appeals Intake Centre. There are two main intake centers: one serving Eastern Canada (NL, PEI, NS, NB, QC, ON) and one for Western Canada (MB, SK, AB, BC, Territories). If mailing, use a secure method (such as Xpresspost or registered mail) so you have proof of when you sent it, in case timing is ever in question. If faxing, keep the fax transmission confirmation.

No matter how you file, make a copy of everything for your records (including the filled form and any attachments). After filing, the CRA will typically send you an acknowledgement letter or (for online submissions) you have the case number as acknowledgement.

Deadlines to File an Objection (Limitation Periods)

It is critical to file your Notice of Objection on time, as there are strict deadlines set out in law. Missing the deadline can forfeit your right to object (though there is a possibility of extension, which we’ll discuss). Here are the deadlines under each Act:

• Income Tax Act: In general, you must file the objection within 90 days from the date the CRA sent you the Notice of Assessment or Notice of Reassessment. However, the Income Tax Act provides an extended deadline for individuals (and certain trusts called graduated rate estates). If you are an individual (not a trust) or a graduated rate estate (GRE), the time limit to object is the later of: (a) 90 days from the date of the notice of assessment, or (b) one year after your filing due date for that tax return. In practical terms, for most individuals this means you have until April 30 of the second year following the tax year, if that is later than the 90-day window. For corporations, trusts (other than GRE), and other taxpayers, the deadline is strictly 90 days from the date on the Notice of Assessment or Reassessment. There is no one-year grace period for corporations – they must object within 90 days.
• GST/HST (Excise Tax Act): The time limit to file a GST/HST objection is 90 days from the date the Notice of Assessment was sent. Unlike income tax, there is no extended one-year deadline for GST/HST. All taxpayers (businesses or individuals assessed for GST/HST) have the same 90-day window. The 90-day count starts from the date the CRA mailed the Notice of Assessment (or Reassessment). This is usually printed on the top right of the notice.

Missed the deadline?

If you fail to file your objection within the allowed time, you may request an extension of time from the CRA. You have up to one year after the original objection deadline to apply for this extension. In your application for extension (which can be done via a letter or there’s a specific form), you need to explain why you filed late and demonstrate two main things: (1) that within the original deadline you either intended to object or were prevented from objecting by circumstances beyond your control, and (2) that it would be fair for the CRA to grant the extension. You must also actually file the objection itself (or include a copy) when requesting the extension – essentially, you’re asking them to accept a late objection. The Chief of Appeals (or a delegated official) will review your request and inform you in writing if the extension is granted or denied. If granted, your objection is considered to have been filed on the date of that decision letter (and then it will proceed normally). If the CRA refuses your extension request, or if you don’t get a decision on it within 90 days, you have one more option: you can apply to the Tax Court of Canada for an order granting you the extension. The Tax Court must receive such an application within 90 days of the CRA’s refusal letter. The Court may grant the extension if you meet similar criteria. This is a complex process, so it’s far better to file the objection on time if at all possible. Mark your calendar with the deadline the moment you receive a Notice of Assessment, and don’t let it lapse.

What Happens After You File an Objection?

After you submit your Notice of Objection, the process moves to the CRA’s Appeals Division. Here’s what to expect:

• Acknowledgement and case assignment: The CRA will usually send you a letter acknowledging receipt of your objection and providing a case number (if you filed online, you got this number immediately). This case number should be referenced in any further correspondence. Your file is assigned to an Appeals Officer (sometimes called Appeals Analyst). Their role is to conduct an impartial review – they were not involved in the initial assessment and will take a fresh look at the facts and law.
• CRA Appeals Officer review: The Appeals Officer will review all information related to your case. They will look at your tax return, the auditor’s or assessing agent’s notes and workpapers, and – very importantly – the reasons you provided in your objection along with your supporting documents. The Appeals Officer may contact you (or your authorized representative) to discuss the objection. This is an opportunity for an open exchange: they might ask for clarification on certain facts, or you might provide additional explanations.
• Outcome – Reassessment, Confirmation, or Determination: After reviewing, the CRA will make a decision on your objection. There are a few possible outcomes:
  • If the CRA agrees with you in full or in part, they will issue a reassessment to correct the assessment. For income tax, this comes as a Notice of Reassessment showing the adjustments (for example, reducing your income or removing a penalty, etc.). For certain matters like loss determinations or credits, they might issue a Notice of (Re)determination. Essentially, you “win” either fully or partially, and your tax liability will be adjusted accordingly. You would also receive any resulting refund, plus interest on that refund if applicable.
  • If the CRA does not agree (i.e., they think the original assessment was correct), they will send you a Notice of Confirmation (for income tax) or a letter stating that the assessment is confirmed. In GST/HST cases, they may issue a letter or a Notice of Decision to the same effect. This means the original assessment stands as is.
  • It’s also possible the CRA could cancel an assessment entirely if it was issued in error, but that’s effectively the same as a full reassessment to $0 for the disputed amount.

The review process can take several months to several years, depending on the complexity of the issues and the CRA’s workload. While you wait, you generally don’t need to do anything unless the CRA asks for more information. It’s a good idea, however, to respond promptly to any correspondence and keep your contact information up to date so you don’t miss their calls or letters.

• Appeal rights after an objection: If you disagree with the CRA’s decision on your objection (for example, if they confirmed the assessment or only gave partial relief and you believe it’s still wrong), you have the right to appeal to the Tax Court of Canada. Appealing to the Tax Court must generally be done within 90 days from the date the CRA’s notice of reassessment or confirmation was sent to you, under both the Income Tax Act and Excise Tax Act . The CRA’s decision letter will typically remind you of this 90-day appeal period. The Tax Court is an independent court where a judge will hear your case afresh. To appeal to Tax Court, you would prepare a Notice of Appeal document and file it with the Tax Court (which has offices and also an electronic filing system).
• If CRA delays their decision: Occasionally, the CRA might not issue a decision on an objection within a reasonable time. Tax law provides a remedy: if the CRA has not replied to your income tax objection within 90 days of you filing it, you have the option to consider it as “deemed” to be confirmed and directly appeal to Tax Court. For GST/HST objections, this waiting period is 180 days with no decision, after which you can also appeal to Tax Court. In practice, most people wait longer than 90/180 days because the CRA often takes more time. But this provision is there so that CRA can’t simply stall indefinitely – you can escalate if needed. If you ever use this route, it’s wise to consult a tax lawyer.
• Beyond Tax Court: Should you go to Tax Court and receive a judgment, either side (you or the government) can appeal that judgment to the Federal Court of Appeal (within 30 days of the Tax Court’s judgment being issued). Further, a Federal Court of Appeal decision can be appealed to the Supreme Court of Canada, but only if the Supreme Court grants permission (leave to appeal). These higher court appeals usually are only pursued for significant legal issues. Most disputes are resolved at the CRA Appeals stage or at the Tax Court level. The possibility of these further appeals underscores that the objection process is part of a larger system of appeal rights that ultimately ensures an independent review of CRA’s actions.

Collection and Interest: What Happens to the Tax Owing During a Dispute?

A major concern when disputing a tax assessment is: “Do I have to pay the amount in dispute now, or can it wait?” Also, “What about interest accruing on that amount?” The rules differ between income tax and GST/HST, and there are important financial implications to understand:

• Income Tax – Collection is Usually Postponed: If you file an objection for an income tax assessment, the CRA will generally pause collection action on the amounts in dispute until the objection is resolved. This means that if you owe $5,000 according to a Notice of Reassessment and you object to the full amount, CRA will generally not require you to pay that $5,000 while your objection is being reviewed (this can often be many months). This policy is meant to prevent hardship and unnecessary collections on amounts that are under review. However, there are notable exceptions:
  • Source deductions and withholdings: If the assessment relates to taxes that should have been remitted to the government (for instance, payroll deductions you withheld from employees, or GST/HST you collected from customers), the CRA is not obliged to hold off on collecting those. The rationale is that in those cases, the money was trust funds collected on behalf of the government (or supposed to be), so CRA often continues to demand payment even if you object. Similarly, if CRA has reason to believe that waiting would jeopardize their ability to collect (e.g., assets being moved or taxpayer insolvency), they can proceed with collections – this is referred to as “jeopardy” collection and is allowed by legislation.
  • Tax shelter donation cases: A specific rule exists for certain charitable donation tax shelters (schemes where individuals donate and get large tax credits, often contested by CRA). In those cases, CRA will postpone collection on only 50% of the disputed amount. The other 50% of tax may be collected (or at least, they won’t refund it if already paid) until the objection/appeal is resolved. This rule was introduced to discourage participation in questionable tax shelters by ensuring participants have some skin in the game during disputes.
  • Large corporations: As mentioned earlier, a large corporation (for income tax) that files an objection must pay 50% of the disputed tax upfront. The remaining 50% is held in abeyance (not collected) pending the outcome.
  • Non-disputed amounts: If part of an assessment is not under dispute, that part should be paid. For instance, if you agree you owe $2,000 but dispute $1,000, you should pay the $2,000. Only the amounts under objection are subject to the hold on collections.

It’s worth noting that once the objection is resolved, any remaining balance that you owe (tax, interest, penalties) becomes payable. The CRA will send a collection notice and expect payment, or else they may start collection enforcement after the grace period (90 days after the decision). If you appeal to the Tax Court after an objection, the CRA will continue to hold off on collection for the amounts in dispute until the court makes its decision (or you withdraw the appeal). So the hold on collections generally extends through the end of the Tax Court process for income tax disputes. One exception: if you lose in Tax Court and decide to appeal further to higher courts, the CRA usually will start collections after the Tax Court decision – they won’t wait for appeals to Federal Court or Supreme Court, though they might accept security in lieu of payment in those cases.

• GST/HST – Amounts Assessed Are Payable (No Automatic Hold): Under the Excise Tax Act, the rules are different. When the CRA issues a GST/HST Notice of Assessment, the amount assessed is considered payable immediately, even if you file an objection. Filing a GST/HST objection does NOT automatically suspend collection action by the CRA. In fact, the law expressly allows CRA to attempt to collect the full amount while the objection or appeal is ongoing. The rationale here is that GST/HST often involves amounts businesses have charged to customers (output tax) and should have remitted, so the government treats it with urgency.

That said, the CRA has discretion to postpone collections in GST/HST cases too – the law says they “may” hold off on all or part of the amount in dispute, but it’s not guaranteed. In practice, if you communicate with CRA collections and your case is strong or under review, they might agree to hold off temporarily, but you should not assume this will happen. One concrete option you have under the law is to provide a security deposit to the CRA for the amount in dispute. If you post security acceptable to the Minister (for example, a bank letter of guarantee or a surety bond for the amount owing), then the CRA will not collect the disputed amount while the objection/appeal is in progress. The security basically substitutes for payment – it assures the CRA they will get the money if you ultimately lose but keeps the funds in your hands (or rather, with the bank) in the meantime. If the dispute is resolved in your favor, the security is released back to you. Posting security is more common for very large GST disputes or where paying the amount would cause severe cash flow issues.

For most GST/HST disputes, taxpayers either pay the amount and then fight (to stop interest – see below) or they don’t pay and risk collections. It’s a tough position. It’s important to be proactive: if you file a GST objection and cannot pay the amount, you might contact CRA Collections to discuss your case and see if they’ll hold off. Document those communications. Remember that even if CRA doesn’t actively chase the amount, interest will accrue.

• Interest during disputes: Regardless of income tax or GST/HST, one thing remains true: interest keeps ticking on any unpaid amounts. The filing of an objection does not stop interest charges on the amount in dispute. Interest is charged at the CRA’s prescribed rate (which can fluctuate quarterly) from the original due date for the tax. This means if you delay paying an amount and eventually lose the objection, you’ll have to pay all the accumulated interest as well. For income tax, because CRA usually doesn’t collect immediately, people sometimes mistakenly think interest is also frozen – it is not. The CRA explicitly states that in most cases, interest will apply to amounts owing while under objection, and if you want to avoid accruing interest, you can pay the amount (full or partial) at any time. Paying will stop further interest from accruing on the portion paid, since it’s no longer owing. If you later win your objection, any overpayment will be refunded to you with interest by the CRA. Effectively, paying the disputed amount is like parking the money with CRA to cap your interest exposure – if you win, you get it back (with some interest, though typically the CRA’s refund interest is a bit lower than the rate they charge on debts). If you lose, at least you haven’t run up a larger interest bill.

Practical Tips for a Successful Objection

Filing a Notice of Objection can be a daunting process, but a few practical strategies can help things go more smoothly and improve your chances of a favorable outcome:

• File Before Deadline: Always keep the deadlines in mind. It’s advisable to file your objection as soon as you have decided to dispute the assessment – you do not need to wait until near the deadline. Filing early gets your case in the queue sooner.
• Be Clear and Complete in Your Reasoning: Craft your objection like you’re telling the story to someone who knows nothing about your case. Use plain language and, if helpful, reference the tax rules or publications that support you. Providing a logical, well-organized argument makes it easier for the Appeals Officer to see the merit in your case. Include all relevant information and documents at the outset if possible – missing info can delay the review because the officer may have to come back to you with questions.
• Attach a Copy of the Assessment Notice: When you mail a paper objection or write an objection letter, it’s very helpful to attach a copy of the Notice of Assessment/Reassessment you’re disputing. This clearly identifies the assessment number and date, and it helps ensure CRA’s Appeals knows exactly what you’re referring to.
• Use the CRA Online Services for Efficiency: If you’re comfortable with it, filing your objection through My Account / My Business Account is generally faster and more reliable than mail. You get immediate confirmation and a case/reference number, which is peace of mind. You also can upload documents directly to support your case, which gets them into the CRA’s hands instantly. This can shave weeks off the process (no postal mail delays, no risk of lost mail). Additionally, you can log in later to check the status of your objection or see if the CRA has sent you any secure messages about it.
• Consider Paying Amounts to Reduce Interest (Especially for GST/HST): As discussed, interest will accumulate on unpaid balances during the dispute. If you have the financial ability, you might choose to pay the portion of the assessment in dispute to stop interest charges. This is more common in GST/HST cases due to the lack of collection hold – many businesses pay the amount to avoid collection or high interest, then pursue the objection to hopefully recover the money. For income tax, since collection is usually on hold, some individuals opt not to pay right away; but if the amount is large and the interest could be significant, you can pay it to halt interest and request a refund later if you win.
• Keep Documentation and Proof: Maintain a file with copies of everything related to the objection: the objection form/letter you sent, the courier or fax confirmation, the CRA acknowledgment letter, and any letters or notes of calls with the CRA. This will help if any issue arises about what was communicated or if you need to reference something later (for example, if you appeal to court, you’ll want a record of what transpired). Good record-keeping is part of being a diligent taxpayer and can save headaches down the road.
• Seek Professional Advice if Needed: If the amounts are large or the issues are legally complex, you might consider consulting a tax professional (like a tax lawyer). They can help frame the arguments in the most persuasive way and ensure you’re not missing any relief you could claim. Also, if your objection advances to an appeal in Tax Court, professional representation is recommended.
• Be Patient but Persistent: Finally, understand that tax objections can take time. The CRA deals with a high volume of disputes (for example, objections related to certain large issues or backlogs can slow things down). While you wait, interest issues aside, your case is essentially in limbo. It’s okay to follow up periodically, but also know that an objection for, say, a complex business audit might easily take a year or more to get a resolution. If an unreasonable amount of time has passed, you could escalate by appealing to Tax Court on the basis of delay (as noted, 90 or 180 days with no response gives you that right).

By following these tips – filing promptly, presenting a clear case with full support, and understanding the process – you greatly improve your chances of a successful outcome or at least a smoother experience. The Notice of Objection is a powerful tool for taxpayers to ensure they are taxed fairly according to the law, and when used effectively, it is an essential part of Canada’s tax dispute resolution system that can address many issues without needing to resort to the courts.

Form T1135 – the Foreign Income Verification Statement – must be filed by any Canadian resident taxpayer (individual, corporation, or certain trust/partnership) who at any time in a year owns specified foreign property with a cost of more than C$100,000. This requirement is intended to ensure taxpayers report foreign-source income and assets. Understanding what constitutes “specified foreign property” (SFP) is critical, as it determines whether a T1135 filing is required. Below, we examine the statutory definition of SFP under the Income Tax Act (Canada) (ITA). We also note considerations for individual vs. corporate filers and briefly mention the availability of the Voluntary Disclosures Program for those who have failed to file form T1135.

Statutory Definition under the Income Tax Act (Canada)

The term “specified foreign property” (SFP) is defined in subsection 233.3(1) of the ITA. The definition encompasses a broad range of assets held outside Canada or in foreign entities, and generally include the following key categories:

• funds or intangible property, or for civil law incorporeal property, situated, deposited or held outside Canada (e.g. cash held in foreign bank accounts, patents or copyrights situated abroad. According to the CRA, stock of Canadian-resident companies if held by the taxpayer through a foreign broker or custodian outside Canada),

• tangible property, or for civil law corporeal property, situated outside Canada (e.g. precious metals held outside Canada),
• a share of the capital stock of a non-resident corporation,
• an interest in a non-resident trust (e.g. an ownership interest in a foreign trust, such as a foreign mutual fund trust, acquired by purchase or investment),
• an interest in a partnership that owns or holds specified foreign property (the CRA provides that if a Canadian taxpayer is a partner in a partnership that itself owns SFP, the partnership interest is SFP (unless the partnership is itself required to file a T1135 as a “specified Canadian entity”),
• an interest in, or right with respect to, an entity that is non-resident (this captures convertible or exchangeable instruments, options, etc. related to foreign assets),
• indebtedness owed by a non-resident person (e.g. funds lent to a non-resident person or entity, including foreign government or corporate bonds, mortgages, notes, and other receivables from non-residents), and
• an interest in, or for civil law a right in, or a right — under a contract in equity or otherwise either immediately or in the future and either absolutely or contingently — to, any property (other than any property owned by a corporation or trust that is not the person) that is specified foreign property (for example, a life insurance policy issued by a foreign insurer and gold certificates outside Canada could be SFP).

However, the ITA also excludes several categories of property from the definition of SFP. Excluded properties generally (i.e. not considered SFP) include:

• property that is used or held exclusively in the course of carrying on an active business of the person or partnership (determined as if the person or partnership were a corporation resident in Canada) (e.g., if a Canadian corporation owns a warehouse or equipment in a foreign country that is used solely for its active business operations, that asset is not SFP),
• a share of the capital stock or indebtedness of a non-resident corporation that is a foreign affiliate of the person or partnership for the purpose of section 233.4 of the ITA (such investments may need to be reported under separate foreign affiliate rules and Form T1134, not on T1135),
• an interest in, or indebtedness of, a non-resident trust that is a foreign affiliate of the person or partnership for the purpose of section 233.4 of the ITA,
• an interest in a non-resident trust that was not acquired for consideration by either the person or partnership or a person related to the person or partnership,
• an interest in a trust that is described in paragraph (a) or (b) of the definition exempt trust in subsection 233.2(1) of the ITA, or that would be described in paragraph (b) of that definition if it was drafted a certain way):
• an interest in a partnership that is a specified Canadian entity,
• a right with respect to, or indebtedness of, an authorized foreign bank that is issued by, and payable or otherwise enforceable at, a branch in Canada of the bank, and
• personal-use property of the person or partnership (e.g.  a vacation home owned abroad that the taxpayer uses primarily for personal vacations (and not to earn income) is considered personal-use property and is not reportable on T1135). The CRA interprets “primarily” as more than 50% personal use.

In summary, the statutory definition casts a wide net over foreign assets, but it also provides for significant carveouts. Tax professionals should first apply this definition to determine if a client’s foreign holdings are SFP. If the total cost of all such SFP exceeds C$100,000 at any point in the year, a T1135 filing is required.

Beneficial Ownership – Chan v. The Queen (2022 TCC 87)

One notable case is Chan v. The Queen, 2022 TCC 87. In this Tax Court decision, the taxpayer (Mr. Chan) had opened a foreign bank account in his own name in China, but did so on behalf of his father and with the father’s funds. The CRA assessed penalties for failure to file T1135, assuming Mr. Chan owned the Bank of China account. The Tax Court, however, found that Mr. Chan was not the beneficial owner of the account assets – his father was. The judge concluded that although the account was in the son’s name, the father provided all the funds and exercised all control and benefit from the account. Because the son did not actually own (beneficially) the foreign property, he was not required to file Form T1135 for that account. This ruling underscores that who “owns” specified foreign property is a substantive question of fact. Simply being listed as an account holder or legal owner is not conclusive if, in reality, the asset is held in trust for someone else.

Considerations for Individuals vs. Corporations as T1135 Filers

Both individual taxpayers and corporations (as well as trusts and partnerships) can have T1135 filing obligations, but the nature of their foreign properties and applicable exclusions may differ:

• Individuals: Common SFP for individuals include foreign bank accounts, investment accounts, foreign stocks or bonds, and foreign real estate. A key consideration is the personal-use property exclusion, which often applies to individuals’ vacation homes or personal assets abroad. Tax advisors should determine if a client’s foreign real property is primarily for personal use (excluded) or if it’s an income-producing rental or investment (included).
• Corporations: Canadian corporations must file T1135 for SFP they own above the threshold, and they often encounter the active business property exception. If a corporation’s foreign assets are integral to its active business operations (e.g. overseas branch office, machinery, inventory abroad), those assets are generally not SFP. Corporations commonly have foreign affiliates, which are excluded from SFP. Corporate filers should also note that the T1135 deadline for corporations aligns with their tax return due date (6 months after fiscal year-end), which differs from the individual deadline.

Regardless of taxpayer type, it’s important to document the purpose and use of each foreign asset. For instance, if a corporation claims an asset is used 100% in active business (to exempt it from SFP), maintaining evidence of that business use is prudent. Similarly, individuals claiming personal-use status for a property should be prepared to support the claim (e.g. usage logs). In all cases, keeping track of cost amounts of foreign properties is essential, since the $100,000 threshold is based on cumulative cost, not market value.

Voluntary Disclosures and Compliance

If a taxpayer realizes they failed to report specified foreign property when required, they should be aware of the CRA’s Voluntary Disclosures Program (VDP). The VDP allows taxpayers to come forward to correct previous omissions or errors, including unfiled T1135 forms, in order to avoid or reduce penalties. The CRA explicitly encourages taxpayers who have not filed or who have filed incomplete information to use the VDP to get back into compliance. A valid disclosure that meets the program’s conditions may result in reduction of penalties and interest.

Conclusion

Specified foreign property is defined broadly under Canadian tax law, and the scope of Form T1135 is extensive. By understanding the inclusions and exclusions in the definition, advisors can ensure that individuals and corporations meet their compliance obligations.

What it is: Canada’s Goods and Services Tax (GST) is a value-added tax of 5% on most supplies made in Canada. In participating provinces, an extra provincial component applies (the HST); zero-rated supplies are taxed at 0%, and exempt supplies are outside the tax and typically don’t allow input tax credits (ITCs). The Act places the tax on the recipient, and registrants must charge, collect, and remit it.

1) Do I need to register?

• Small supplier rule: If your total taxable revenues (worldwide, including associates) are ≤ $30,000 in the last four consecutive calendar quarters or in a single quarter, you’re a small supplier and do not have to register. Exceeding $30,000 means you cease to be a small supplier at that time.
• Mandatory registration: Once you are no longer a small supplier, you must register (generally within 30 days of first making a taxable supply not as a small supplier).
• Voluntary registration: You may register earlier (useful if you want to claim input tax credits).
• CRA’s step-by-step on when to register and when you start charging GST/HST is here.

2) What do I charge customers?

• Rates: Charge 5% GST or the applicable HST rate based on place-of-supply rules; zero-rated items (e.g., many basic groceries) are taxed at 0%; exempt supplies (e.g., many health, education, financial services) are not taxed. See CRA’s rate and place-of-supply guidance.

3) How do input tax credits (ITCs) work?

If you’re registered, you generally recover the GST/HST paid on business inputs by claiming ITCs in your return (subject to documentation/timing rules). See section 169 of the Excise Tax Act (Canada) (ETA) and CRA’s ITC overview.

4) Filing, remitting, and deadlines

• Net tax = GST/HST collected − ITCs: The ETA defines net tax in section 225.
• File & remit: Returns are filed and net tax is remitted under section 228 of the ETA.
• How often do I file? CRA assigns a reporting period based on your prior-year annual taxable supplies: ≤ $1.5M: Annual; >$1.5M to ≤ $6M: Quarterly; > $6M: Monthly. You can elect to file more frequently.
• Due dates:
  • Monthly/Quarterly: Return and payment due 1 month after the period end.
  • Annual: Filing 3 months after fiscal year-end; payment timing depends on whether you have business income and your year-end (e.g., many December 31 filers: payment Apr 30, file by Jun 15). See CRA’s deadline page here.
• Instalments (annual filers): If last year’s net tax ≥ $3,000, you may need quarterly instalments in the current year.

5) Records, invoices, and penalties

• Keep records: CRA requires you to keep GST/HST records (including support for ITCs) for 6 years from the end of the year to which they relate.
• Late filing/late payment: CRA may assess penalties and interest if returns or amounts aren’t received by the due date; penalties for late filing are provided under the ETA (e.g., section 280.1) and explained on CRA’s site.

Have you recently sold or renovated a home in Canada? You might be on the CRA’s radar for a “builder” audit — whether you think you’re a builder or not. The CRA has been aggressively targeting individuals who construct, substantially renovate, or flip residential properties and sell them, often without charging HST or properly reporting the income. In Ontario alone, real estate audits from 2015 to 2023 yielded over $300 million in GST/HST assessments, illustrating how serious the CRA is about compliance in this sector. This guide will explain what a builder audit entails, why you might be targeted, what your GST/HST obligations are, and how to protect yourself if the CRA comes knocking.

What Is a “Builder” for GST/HST Purposes?

Under Canadian tax law, the term “builder” has a specific meaning. It’s not limited to professional developers – even one project can make you a builder in the CRA’s eyes. Generally, a builder is any person in the business of constructing or substantially renovating homes for sale. This can include individuals who:

• Build or renovate a house with the intention to sell (an “adventure or concern in the nature of trade”).
• Buy a new or unoccupied home from someone else and then resell it.
• Buy into a housing project under construction and finish it for sale.

Importantly, an individual who builds or renovates a home to use as their own primary residence is not considered a builder for GST/HST purposes. For example, if you construct your own home and genuinely live in it as your primary      residence for a substantial period, that’s personal use. But if you built or bought a home “to flip” for profit, even just once, the CRA may deem that you acted as a builder in a business venture. In that case, different tax rules kick in.

Why does this definition matter? If you’re a “builder” under the Excise Tax Act, you’re required to charge and remit GST/HST on the sale of the new or substantially renovated property, or account for tax via a deemed sale (self-supply). You may also lose out on certain rebates and exemptions intended for genuine homeowners. The CRA uses analytics and third-party data to identify potential unreported builder sales.

Why Does the CRA Audit Builders?

The CRA doesn’t choose audit targets randomly – they focus on areas of high non-compliance risk, and real estate is a prime sector. So-called “builder audits” often arise from certain red flags in your tax profile or property transactions. You might be targeted for a GST/HST audit if:

• New Home Sale: You sold a newly built or substantially renovated home, especially shortly after completing the construction or reno.
• Quick Turnaround: You moved into a new or renovated home and then sold it after only a brief occupancy (or never moved in at all).
• Multiple Properties: You’ve repeatedly listed or sold homes in a short time frame (e.g. serial house flipping).
• Real Estate Experience: You or your company have construction or real estate experience, suggesting you know the ropes of property dealing.
• Unreported Flip Profits: The sale wasn’t reported correctly on your income tax return. For instance, declaring the profit as a capital gain or not at all, when it should be full business income.
• Principal Residence Exemption: You claimed the principal residence exemption on the sale to avoid tax on the gain, but the CRA suspects you never intended to live in the property long-term (or you have claimed multiple “principal” residences in short succession).

In short, if you bought, built, or renovated properties and sold them for profit, even just one, the CRA’s algorithms and auditors are on the lookout.

What Does a Builder Audit Involve?

If you’re selected for a builder audit, expect a thorough review of your records and circumstances. The process typically begins with a formal CRA audit notice or letter informing you that your real estate transaction(s) are under review. Here’s what usually happens:

• Information Request: The CRA will request a range of documents. Commonly, they’ll ask for building permits, purchase and sale agreements, construction contracts and invoices, mortgage documents, proof of occupancy (e.g. utility bills, insurance, or driver’s license address), and any agreements related to the property. Essentially, they want to piece together a timeline: when you bought or built the property, how long you lived there (if at all), when you sold, and whether you properly accounted for GST/HST.
• Questionnaire/Interviews: You might receive a questionnaire or be asked for explanations. For example, “What was your intention when you built the home?” or “How long did you live there and what evidence can you provide of occupancy?” The CRA is probing whether this was a genuine residence or an house      flip. Be cautious – your answers can have legal implications.
• Analysis of Intent: A critical issue is your intent at the time of construction or purchase. If the CRA determines your primary or secondary intention was to sell for profit (not to use the home as a long-term residence), they might classify you as a builder for tax purposes. Official CRA guidance states that if you intended to sell the house (even if you or a relative lived in it briefly), the sale is taxable and no new housing rebate is available.
• Audit Outcome – Proposal: After reviewing information, auditors often send a proposal letter outlining preliminary findings. You typically have a chance to respond or provide additional evidence at this stage before a final assessment is issued.

Throughout this process, it’s wise to engage a qualified tax lawyer to manage communications. Remember that anything you tell or submit to the auditor becomes part of the record. It’s crucial to present your case with proper context and legal arguments, rather than handing over documents with no explanation.

GST/HST Consequences for Builders and Flippers

The most immediate impact of a builder audit is usually on the GST/HST side. If the CRA concludes that you were acting as a builder, several costly outcomes may result:

• HST on the Sale: The CRA will assess GST/HST on the sale price of the property if it was new or substantially renovated. This holds true even if you didn’t charge HST to the buyer at the time of sale.
• Deemed Self-Supply: What if you never “sold” the home because you kept it or lived in it? Tax law has a mechanism for that: a deemed self-supply. If you’re a builder and you keep the property (for example, by moving in or renting it out), you are deemed to have sold and repurchased it at fair market value when construction is completed or when a lease begins. HST is calculated on that self-assessed “sale”. In other words, CRA can charge you HST as if you sold the home to yourself, ensuring tax is paid even without an actual sale. This often catches people off-guard – you might move in thinking no HST applies, but later get a bill for HST on a deemed sale value.
• Loss of New Housing Rebate: Normally, individual homebuyers of new homes can claim a GST/HST New Housing Rebate (a partial refund of the HST, available for primary residences under certain price thresholds). However, builders cannot claim this rebate when they construct and sell a home – it’s meant for end-users. If you claimed the rebate (or factored it into the purchase price with your buyer) and CRA decides you didn’t actually qualify as a genuine primary resident, they will claw it back.
• Missed Input Tax Credits (ITCs): To add insult to injury, if you didn’t consider yourself a business at the time, you may not have claimed input tax credits for the GST/HST you paid on construction costs (materials, contractor fees, etc.). Normally, a builder registered for GST/HST could offset the HST collected with ITCs on their costs. But many “accidental builders” don’t register or claim ITCs during the project. By the time      an audit starts, your records may pose challenges to recover those credits.    

All told, a builder audit can leave you on the hook for a substantial tax bill: the unpaid GST/HST, plus interest retroactive to the sale or deemed supply date, and often penalties.

Income Tax Implications of Flipping Properties

In addition to GST/HST issues, the CRA often uses a builder audit to scrutinize your income tax reporting on real estate sales. Key areas they examine include:

• Business Income vs. Capital Gain: When you sell a property, was the profit reported as a capital gain (only 50% taxable) or as business income (100% taxable)? Flippers often hope to treat profits as capital gains or shelter them with the principal residence exemption. However, if your intent was to flip for profit, the CRA’s could take the position that the profit is fully taxable business income. This can dramatically increase your income tax for the year of sale.
• Reopening Past Returns: Normally, the CRA is limited to reassessing a tax return within three years. But in cases of neglect, carelessness, or willful misrepresentation, they can go back further. House flipping audits often invoke this exception. If you’ve done multiple flips over the years, expect CRA to dig into those prior sales as well – even beyond the usual 3-year window (the normal-reassessment period ) . In short, one audit can expand to a multi-year, multi-property examination.
• Penalties and Interest: The financial hit isn’t just the tax itself. CRA can impose substantial penalties. For GST/HST, a gross negligence penalty can be 25% of the tax owing if the CRA takes the position that      you knew (or ought to have known) that the sale was a taxable supply     . For income tax, gross negligence penalties could be 50% of the understated tax. On top of that, interest accumulates daily on any unpaid tax from the date it should have been paid. Over several years, interest can end up rivalling in size the tax itself.

How to Respond if You’re Facing a Builder Audit

Don’t panic – but do take it seriously. If you receive a CRA audit letter about a real estate sale (or any indication you’re being reviewed as a “builder”), prompt and careful action is crucial:

1. Don’t Ignore the Letter: It should go without saying, but never ignore a CRA audit notice. These matters won’t simply go away, and non-response can lead the CRA to assess you arbitrarily. The first contact letter typically gives a deadline to respond or provide documents. Meeting that deadline (or requesting an extension when needed) shows cooperation.
2. Consult a Professional Early: Consider getting a tax lawyer on board before you reply to the CRA. The audit stakes are high – you’re potentially looking at significant liabilities. A professional can communicate with the CRA on your behalf, ensure you don’t inadvertently admit to things out of context, and help protect your rights. Also, communications with a lawyer may be privileged, whereas anything you say to       your accountant could be used as evidence against you.
3. Organize Your Records: Start gathering all relevant documentation that the CRA has requested (and any other records that might support your position). This includes purchase contracts, sales documents, renovation receipts, permits, occupancy proof (e.g. utility bills in your name), insurance records, correspondence about the property, etc. If you did live in the home for a period, compile proof of that (change of address notices, ID, mail, school registration, etc.).
4. Don’t Volunteer Unnecessary Info: Answer the CRA’s questions truthfully, but stick to what is asked. Do not send them your entire life’s financial history if they only asked for details on one property. Over-disclosure can open up a new can of worms. Similarly, avoid speculative or casual statements.
5. Maintain a Professional Tone: It’s easy to get defensive or emotional – after all, your hard-earned money is at stake and the audit letter’s language can feel accusatory. Keep communications factual and polite. If you disagree with the auditor’s stance, you’ll have a chance to formally challenge it (see next section), so there’s no need to argue aggressively during the audit itself. Your goal in the audit stage is to provide complete, accurate information and avoid misunderstandings.

Throughout the audit, you and your representative should aim to clarify why you may not be a builder as defined, or why certain exemptions should apply.

After the Audit: Challenging a Builder Assessment

What if the CRA concludes the audit and issues a hefty reassessment – essentially a bill for taxes and penalties? All is not lost. You have the right to challenge the CRA’s findings through the appeals process.

• Notice of Objection: Filing an objection is the first step if you disagree with a GST/HST or income tax reassessment. You generally have 90 days from the date of the Notice of Assessment or Reassessment to file a formal Notice of Objection. In your objection, you (or better, your tax lawyer) will lay out the reasons you believe the CRA’s assessment is wrong – for instance, disputing the “builder” characterization, the property’s use, the applicability of certain rebates, or the amount of the assessment. This objection is reviewed by the CRA’s Independent Appeals Division, not the original auditors. They may confirm, vary, or vacate the assessment after considering your arguments.
• Appeal to Tax Court: If the outcome at the Objection stage is unsatisfactory (or if CRA delays unduly), you can further appeal to the Tax Court of Canada. This escalates the dispute to a judicial process. Often, the mere act of objecting (and showing you are unafraid to go to court if needed) can lead CRA to revisit the strength of their position. Many disputes settle or resolve without a trial. However, being prepared to take it to court – with strong evidence and legal precedent – is sometimes necessary.
• Payment and Collections: Importantly, for GST/HST assessments, filing an objection does not prevent CRA from attempting to collect the HST amount due (unlike income tax, where collection is usually stayed during a timely objection). You might be required to pay the HST amount or post security to hold off collections.
• Settlements and Relief: Through the objection/appeals process, there may be room to negotiate. For example, even if the tax itself is clearly payable, a gross negligence penalty might be negotiated down or waived if you can demonstrate you were not willfully negligent. Also, interest relief can sometimes be sought through the Taxpayer Relief provisions (if circumstances like a serious illness, financial hardship, CRA delay, etc. contributed to the issue).

The key takeaway is do not accept a CRA reassessment as final if you have grounds to contest it. There are procedural timelines to respect, though, so seek legal counsel quickly once an assessment arrives.

Conclusion: Get Professional Help and Know Your Rights

CRA builder audits are no small matter – they combine complex GST/HST rules with detailed factual analysis of your intentions and actions. The stakes (taxes, penalties, interest, and a potential legal battle) are high, but you don’t have to face it alone. As a tax law firm with experience in CRA audits and tax litigation, we help builders and investors across Canada navigate these audits and fight unfair assessments.

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