Tax Court of Canada
The Tax Court of Canada (the “Tax Court”) is where taxpayers usually have some of the largest reductions in tax payable, yet the structure of your case at the outset (CRA Audit) can determine the level of success that you will achieve at Tax Court.
There are potential advantages to going before the Tax Court. The CRA is represented by the Department of Justice, who can serve as a ‘fresh set of eyes’ vs. the CRA officers you had previously dealt with. You are also before a Tax Court judge who knows the law, but is neutral on your case.
The Tax Court of Canada is an impartial court that provides a forum for taxpayers to resolve their tax disputes. The following is a general overview of the Tax Court of Canada’s process:
- Choosing the Procedure:
- Informal Procedure: Suited for smaller, less complex cases. There are no filing fees, and the process is designed to be quicker and simpler. The limits for tax and penalties are $25,000 per year or a loss amount of $50,000. Taxpayers can choose to limit their appeals to these amounts at issue to utilise this procedure.
- General Procedure: Used for larger or more complex cases where the amounts exceed the limits of the Informal Procedure. This process involves filing fees and follows formal legal steps. It offers a thorough examination of your case through documentary and oral disclosures, examinations for discovery, and potential trials.
- Informal Procedure: Suited for smaller, less complex cases. There are no filing fees, and the process is designed to be quicker and simpler. The limits for tax and penalties are $25,000 per year or a loss amount of $50,000. Taxpayers can choose to limit their appeals to these amounts at issue to utilise this procedure.
- Filing a Notice of Appeal: This step is initiated once a taxpayer receives a Notice of Confirmation or an official response to vary their reassessments from CRA Appeals. Taxpayers have 90 days from receiving this notice to file a Notice of Appeal with the Tax Court of Canada. An Application for an Extension of Time to file a Notice of Appeal can be made within 1 year if the initial 90-day deadline is missed.
- Litigation Steps:
- Document Exchange: Both parties exchange lists of documents that they will rely on during the litigation.
- Examinations for Discovery: Each party questions the other, which can be done in person or in writing.
- Settlement Conference: If possible, a settlement conference is held to attempt to resolve the dispute before it goes to trial.
- Trial: If a settlement is not reached, the case proceeds to trial where it is heard before a Tax Court judge.
- Document Exchange: Both parties exchange lists of documents that they will rely on during the litigation.
- Potential Outcomes:
- Resolution without Trial: The vast majority of matters resolve via a settlement without the need to proceed to a trial.
- Decision by the Tax Court: Following a trial, the Tax Court will issue a decision, which can include upholding the assessment (Taxpayer lost), varying the assessment (partial or split success), or vacating the assessment (Taxpayer wins).
- Resolution without Trial: The vast majority of matters resolve via a settlement without the need to proceed to a trial.
- Appeal Options: If either party disagrees with the Tax Court’s decision, they can appeal to the Federal Court of Appeal. Decisions under the General Procedure can have precedential value, influencing future cases.