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Tax
and Revenue Administration
Alberta
Corporate Tax Act
Information
Circular CT-5R3 |
| Released: |
September 10, 2002 |
| Produced by: |
Alberta Finance and Enterprise, Tax
and Revenue Administration |
| For more information: |
tra.revenue@gov.ab.ca |
CT-5R3 / August 2002
Note: Due to the Government
of Alberta reorganization in November 2004, where applicable, the web
versions of our documents have been updated to change references from
"Minister of Revenue" or "Provincial Treasurer" to
"Minister of Finance". References to "Revenue Canada"
or "Canada Customs and Revenue Agency" have been changed to
"Canada Revenue Agency" to reflect that name change as well.
The paper version of this document is available from Tax
and Revenue Administration and if applicable, will be updated as time
permits.
ALBERTA CORPORATE TAX
ACT INFORMATION CIRCULAR:
WAIVER OR CANCELLATION
OF PENALTIES OR INTEREST
This Circular discusses the guidelines that
Alberta Tax and Revenue Administration ("TRA") follows in
administering the waiver or cancellation of penalties or interest. The
topics discussed include:
The comments in this Circular apply to
waiver or cancellation of penalty and interest charges. For simplicity,
"waive" will include the term "cancel".
ITEMS THAT MAY
BE WAIVED
- Section
55.1 of the Alberta Corporate Tax Act (the "Act") provides
the Minister of Finance with the authority to waive penalties or
interest imposed under the Act.
This section applies to 1985 and subsequent taxation years.
- Waivers
of a late-filing penalty, instalment and arrears interest on tax,
penalties on late or deficient instalments, and interest on Alberta
Royalty Tax Credit overpayments will be considered under this section.
Penalties under section 37.1 relating to false statements made
knowingly or under circumstances amounting to gross negligence will
not be waived.
Information Circular CT-4, "Interest
and Penalties" provides a discussion of the penalties and
interest imposed under the Act.
- Waivers
are intended to provide relief in circumstances not otherwise covered
by legislation or administrative policies.
Their use is a last resort mechanism and a request for relief
will be reviewed from this perspective.
If a disputed liability centres on the application of the law
and there is still time to object, a Notice of Objection can be filed
with the Appeals section of TRA.
For years which are not statute-barred, a request can be filed
with the Reassessments section for consideration.
If a year is statute-barred, a request for waiver of interest
or penalties may be
considered even on questions of application of the law.
A
return is statute-barred (that is, no further reassessments may be made
to the return except as provided for under separate provisions in the
Act):
a)
if
at the end of the year the corporation is a Canadian-controlled
private corporation, 3 years after the date of mailing of a notice of
assessment for the year or the date of mailing of a notification that
no tax is payable for the year; or
b) in
any other case, 4 years after the date described in (a).
EXTRAORDINARY
CIRCUMSTANCES
- Penalties
or interest may be waived where extraordinary circumstances prevented
a corporation or its agent from complying with the Act.
Examples of such circumstances include:
- natural
disasters such as flood, fire, storm;
- personal
tragedy such as a serious illness or death of, or in the family
of, the person in a small corporation that oversees and ensures
compliance with the legislation;
- theft
or vandalism of records;
- civil
disturbances.
In
all cases, the Minister of Finance must be satisfied that, despite the
extraordinary circumstances, the corporation made reasonable efforts
to comply with the Act. This
includes making payments on or before the payment due date.
If a corporation fails to make
a payment by the required balance-due day, and the extraordinary
circumstances leading to the request for a waiver of a late-filing
penalty did not commence until after the balance-due day, TRA will not
waive the penalty amount.
- A
postal strike will not generally be enough reason to waive interest on late remittances
by corporations since, under any circumstances, they are able to make
payments at most financial institutions in Canada.
- Late-filing
penalties will not be waived on account of postal strikes unless the corporation
demonstrates that it could not use other means, such as courier
delivery or fax transmission, to file its return on time.
During postal strikes, TRA arranges for the filing of returns
at designated government centres within Alberta.
-
A
waiver of penalties or interest may be granted if a corporation's
return or its payment is already in the postal system or with a
courier when a strike within that agent commences.
ADMINISTRATIVE
DELAY OR ERROR
- Penalties
or interest may be waived in cases where TRA's actions are the primary
cause of the penalty or interest liability.
Examples of such actions include:
- processing
delays by TRA which result in the corporation not being informed
within a reasonable time of an amount owing;
- incorrect
advice or action in response to a corporation's enquiry or request;
- unreasonable
delay in providing information required by a corporation to make the
appropriate payment;
- errors
in material prepared by TRA for the public such as guides or
prescribed forms;
- changes
to interpretation of the tax law by TRA after a tax return has been
filed which relied on a previous interpretation.
- The
corporation must be able to substantiate that the liability is caused
by, or is largely attributable to, TRA.
For example: a request for waiver of interest incurred because
of processing delays will be rejected if it is found that the delay
was caused by the corporation not submitting necessary information.
A liability that arose because a corporation applied a general
response from TRA to its specific circumstance may not be waived if
TRA was not made aware at the time of the response of the
corporation's specific circumstances.
VOLUNTARY
DISCLOSURE
- It
is TRA's policy to reinforce the self-assessment nature of the tax and
incentive programs administered in Alberta.
Therefore, TRA encourages any submission demonstrating the
intent to voluntarily redress previous contraventions of the Act.
In
the case of an acceptable voluntary disclosure, no prosecution will be
undertaken, nor will any civil penalties, including late-filing
penalties, be imposed on any amounts disclosed.
- The
corporation should discuss waivers with TRA at the time the disclosure
is made.
If a late-filing penalty is applied upon assessment, the
corporation may request a waiver of the penalty using as a reason that
there was a voluntary disclosure.
TRA will review the situation and the penalty will only be
waived if all of the
following conditions are met:
a) the
corporation must initiate the disclosure:
a disclosure is not considered voluntary if it arises after
compliance activity was started by TRA, the Canada Revenue Agency (“CRA”), or another jurisdiction;
b) the
disclosure must be complete, accurate and contain all information
relating to the offense; and
c) upon
submission of the return(s) or information, the corporation must pay
the total amount of any taxes owing as a result of the disclosure, and
a reasonable estimate of the ensuing interest, or make acceptable
arrangements for paying such amounts.
SITUATIONS
UNDER WHICH WAIVERS WILL NOT BE CONSIDERED
- The
Alberta corporate income tax system depends on voluntary compliance.
Corporations are charged with the responsibility of correctly
calculating and reporting income, tax and tax credits and filing their
tax returns.
-
Interest
and penalties are often charged when TRA detects and corrects errors
in a filed return. This may not occur until there is a post-assessment review of
the return. That review
might take place several months or years after the initial assessment. In these cases, the charges that are assessed are not subject
to waiver due to this delay, unless the delay was unreasonable and
outside of normal review practice.
Further, charges will not be waived simply because of error on
the part of the tax return preparer or lack of tax knowledge,
misinterpretation or misapplication on the part of the corporation's
principals or its representatives.
-
TRA
will not waive penalties or interest on assessments or reassessments
that are based on information received from CRA if the corporation
has not provided the information to TRA.
- TRA’s
guidelines for waiving penalties or interest do not extend to
financial hardship.
- When
a loss for a year is carried back to a preceding year, the resulting
tax reduction is treated as a payment on account made some time after
the loss year.
The Act provides that, for purposes of calculating the
late-filing penalty and interest, the loss carry-back is to be given
an effective date equal to the latest of these four dates.
a) the
first day following the loss year;
b) the
day on which the return for the loss year is filed;
c) the
day on which the loss carry-back request, form AT1 Schedule 10, is
filed; and
d) the
day on which a request was made for the loss carry-back.
Typically,
the date of application for the loss carry-back is the latest of these.
Penalties and interest that were based on the original tax
assessment will not be waived just because that tax was ultimately
reduced by a loss carry-back.
OTHER
CONSIDERATIONS
- There
may be cases in which CRA waives interest or penalties and the
corporation requests a similar action from TRA.
While the federal action may be persuasive, it does not bind
Alberta to a parallel action.
The waiver request may fit under the federal guidelines but not
under the Alberta guidelines; or a federal waiver may be attributable
to a federal action that does not reasonably affect the corporation's
dealings with TRA.
For example, federal interest liability may have been waived
because a corporation was informed erroneously about its federal
instalment requirements; this would not reasonably affect the interest
liability to Alberta.
-
CRA
may waive interest or penalties for federal purposes if an assessment
action is delayed by CRA and CRA recognizes that their delay was the
cause of the liability for interest or penalties.
If TRA has paralleled the federal assessment, TRA will consider
waiving interest or penalties for the same time period.
-
If
a corporation is charged a late-filing penalty by TRA but not by CRA and the corporation requests a waiver of the penalty on the basis that
its AT1 return was mailed on the same day as its T2 return was mailed,
the penalty may be waived. The
corporation must substantiate its claim that the mailing date to TRA
was not later than the mailing date to CRA and that the return was
not late-filed with CRA.
-
If
a corporation is charged a late-filing penalty because the corporation or the corporation’s representative sent its
AT1 return and payment of the outstanding Alberta tax to CRA in
error, the penalty may be waived. The AT1 return and payment
(showing Alberta as the payee) must have been sent on or before the
filing due date. The
corporation must also provide evidence that CRA received the AT1
return and payment.
- The
conduct of the corporation's dealings with TRA will be examined before
a decision for a waiver will be made.
This will include its history of compliance with tax
obligations, its efforts to prevent the liability or to take
corrective action, and its care in conducting its affairs under a
self-assessment system.
-
A
corporation should not be seeking relief from penalties or interest by
more than one method at a time.
If a corporation has filed an objection or an appeal, or has
otherwise requested a reassessment, it should not concurrently be
seeking a waiver of penalties or interest on the same issue.
APPLICATION
PROCEDURES
- Corporations
or their agents that believe their case meets the above guidelines
should send a request for waiver of penalty or interest in writing to:
- The request for waiver should include:
a) the corporation's name and address;
b) the representative's name and
address;
c) the corporation's Alberta corporate
account number;
d) the taxation years involved;
e) a description of the penalty or
interest for which the waiver is sought and the amount involved;
f) the reasons why it is believed that
the penalty or interest should be waived, supported by documentation
and a chronology of events, as is applicable; and
g) a description of previous contacts
with TRA or other parts of Alberta Finance and Enterprise on the issue.
- During consideration of the waiver
request, the corporation may be asked for more information or
documentation.
- A detailed review is made of the
corporation's request and the decision is final. No further
consideration will be given and the decision is not subject to
objection or appeal. The corporation will be informed of the final
decision in writing.
- Any resulting change to penalties or
interest will be made through an adjustment to the corporation's tax
account, not through reassessment. Refund interest will not be paid on
adjustments.
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