|
Tax
and Revenue Administration
Alberta
Corporate Tax Act
Information
Circular CT-6R1 |
| Released: |
April 1999 |
| Produced by: |
Alberta Finance and Enterprise, Tax
and Revenue Administration |
| For more information: |
tra.revenue@gov.ab.ca |
CT-6R1 / April 1999
ALBERTA
CORPORATE TAX ACT INFORMATION CIRCULAR:
REASSESSMENTS
This Information Circular discusses the provisions of the Alberta
Corporate Tax Act (the "Act") and the administrative policies and practices of
Alberta Finance and Enterprise, Tax and Revenue Administration ("TRA") relating to the reassessment of
amounts due or refundable in a taxation year. The comments in this circular relate only to
adjustments to the Alberta Corporate Income Tax Return ("AT1"). The topics
discussed include:
- The information upon which a reassessment is based may come from a number of sources,
either internal or external to TRA. External sources include the taxpayer,
the Canada Revenue Agency ("CRA"),
the Ontario Ministry of Finance, and the Quebec Ministry of Revenue. Reassessments may
also result from TRA internal actions such as an audit, the disposition of an objection or
appeal, or a reassessment to another year.
- The Alberta income tax system operates on the principle of self-assessment and relies on
voluntary taxpayer compliance. Although TRA may obtain information from other sources, the
taxpayer is responsible for advising TRA of any adjustments required to the tax payable or
refundable tax credits of a taxation year. Providing complete information relating to any
adjustments on a timely basis will expedite the processing of any required reassessments.
- In the discussion of each of the sources of information, the first part of this circular
assumes that the reassessment will be made within the normal reassessment period as
described in paragraph 4. The remainder of the circular describes the circumstances under
which a reassessment may be made after the normal reassessment period has expired.
Normal Reassessment Period
- Except as provided in the Act, a reassessment may not be made beyond the normal
reassessment period of the taxation year. The normal reassessment period of a corporation
that is a Canadian-controlled private corporation at the end of the year is three years
after the date of mailing of a notice of assessment for the year. For all other
corporations, the normal reassessment period is four years after the date of mailing of a
notice of assessment for the year.
- A corporation may be exempt from filing an AT1 for a taxation year ending after June 30,
1994. (See Information Circular CT-2, "Filing Requirements"
for details on exemptions from filing.) If a corporation is exempt from filing a tax
return and, therefore, does not file a return, a notice of assessment is not issued. For
purposes of determining the normal reassessment period where no notice of assessment is
issued, a notice of assessment is deemed, for Alberta purposes, to have been mailed to the
corporation on the day CRA sends the federal notice of assessment.
Information
Received from the Taxpayer
- Within the normal reassessment period, a taxpayer may request an adjustment to an amount
assessed for a taxation year. TRA will review the request and will contact the taxpayer
for additional information or clarification, if necessary. In certain cases, TRA will
confirm with CRA that the adjustment has also been made for federal purposes.
In most cases, the request will be processed if it is supportable. However, in some
circumstances a reassessment may not be processed. Examples of such circumstances are
discussed in paragraphs 7, 26 and 27.
- If the taxpayer requests an adjustment solely to discretionary deductions (other
than loss carry-backs) in a taxation year, a revision to the amount previously deducted
will generally be accepted by TRA under one of the following circumstances.
a) The time limit for filing a notice of objection for the taxation year (i.e. 90 days
after the date of a notice of assessment or reassessment for that taxation year) has not
expired.
b) CRA has accepted and processed the adjustment for federal purposes.
c) The net affect on Alberta tax payable is nil. This may occur where the change to one
discretionary deduction is offset by a change to another discretionary deduction. A notice
of reassessment will not be issued in this case.
(d) The adjustment relates to a computational error or omission in the amount claimed and
does not result solely from the taxpayer's attempt to change the amount of the deduction
assessed. The following examples illustrate this difference.
In the first example, assume that in its 1995 taxation year, the corporation purchased
an asset for $100,000. In filing its 1995 return, $10,000 was entered as the cost of the
asset into the CCA schedule. Providing there are no other adjustments to the cost of the
asset, this is a computational error. TRA would process the adjustment to correct the CCA
schedule when advised by the taxpayer of the error.
In the second example, assume that there are no computational errors evident. The
corporation's maximum CCA claim for 1995 is $25,000. However, upon filing its return, the
corporation decides to claim CCA of only $15,000. After the return is assessed, the
corporation decides to maximize its CCA claim. There are no adjustments required to any
other amounts. In this case, TRA will not process the corporation's request.
The term "discretionary deductions" is used to describe the type of
deductions available where the taxpayer has the discretion to claim any amount up to the
maximum allowable. One example is capital cost allowance.
Information Received from CRA
- Under an agreement between TRA and CRA, TRA receives information relating to
assessments and reassessments made by CRA. CRA's data is compared to
TRA's records and discrepancies are investigated by TRA. Based on its review, TRA will
determine what action, if any, is required. In some cases, the corporation will be
contacted to provide further information or clarification. Where possible, TRA will
process a reassessment to agree with CRA's data. This process is intended to
provide a verification check for TRA's purposes. The onus remains on the
corporation to make TRA aware of any adjustments made by CRA which affect the
Alberta return.
Please refer to Information Circular CT-2,
"Filing Requirements" for a discussion of the time limits for providing this
information. As well, TRA may reassess a corporation prior to that corporation providing
the additional information.
- TRA will not automatically reassess to agree to
CRA's data where the
discrepancy relates to a loss carried back for federal purposes. The taxpayer must advise
TRA that the loss is to be applied for Alberta purposes. See Information
Circular CT-7, "Calculation and Deduction of Losses" for details.
- The corporation may have claimed different discretionary deductions for federal purposes
than for Alberta purposes. If, as a result of CRA's reassessment, the maximum
allowable claim for Alberta purposes is reduced below the amount previously deducted for
Alberta purposes, TRA will adjust the deduction to reflect the correct maximum claim.
Where the maximum allowable claim has not been exceeded, TRA will not reassess the amount
claimed for Alberta purposes to agree with the federal amount unless advised to do so by
the taxpayer. The taxpayer must provide TRA with details of both the federal and Alberta
revisions.
Information Received from Ontario or Quebec
- Alberta and the provinces of Ontario and Quebec exchange two types of information:
information relating to proposed reassessments based on the allocation of income among
provinces and information relating to reassessments made to taxable income which affect
the tax payable to the other provinces. These three provinces administer their own
provincial corporate taxes. Through this exchange of information, TRA is able to determine
if Alberta tax payable is affected by reassessments made by Ontario or Quebec. In
addition, through this exchange the provinces attempt to ensure that the corporation's
income is correctly allocated among the jurisdictions in which the corporation has
permanent establishments. TRA will follow procedures similar to those described in
paragraph 8. Although this exchange of information is made, the onus remains on the
corporation to advise TRA of any adjustments made by Ontario or Quebec which affect the
Alberta return.
Please refer to Information Circular CT-2,
"Filing Requirements" for a discussion of the time limits for providing this
information. As well, TRA may reassess a corporation prior to that corporation providing
the additional information.
Reassessments as a Result of TRA Audit Action
- As a result of an audit, TRA may propose that a reassessment be made to correct errors
or omissions in the taxpayer's return. See Information Circular CT-10,
"Tax Audit" for a discussion on TRA's audit policies and practices.
- Reassessments initiated by TRA audit may only be processed within the normal
reassessment period unless one of the circumstances described in the following paragraphs
exists.
Waiver and Revocation of Waiver
- If the normal reassessment period is about to expire and an issue relating to a proposed
reassessment has not been resolved between the taxpayer and TRA, the taxpayer may wish to
waive the limitation of the normal reassessment period. If a valid waiver has not been
filed, it may be necessary for TRA to issue a reassessment before the normal reassessment
period expires even if the issue has not been fully resolved. A waiver ensures that the
taxpayer does not lose the right to have an adjustment made even if the normal
reassessment period expires.
- In order to make a waiver valid, the taxpayer must submit to TRA a prescribed form
("Waiver in Respect of Time Limit for Assessment, Reassessment or
Determination"), signed by an authorized signing officer and specifying the
conditions under which the normal reassessment period has been waived. The waiver must
be received by TRA before the normal reassessment period expires.
- Once a valid waiver is received by TRA for a taxation year, that year is held open for
reassessment indefinitely in relation to the matters specified in the waiver. The taxpayer
may, however, submit to TRA a "Notice of Revocation of Waiver" in prescribed
form. The revocation prohibits a reassessment for that year from being processed as a
result of a waiver beyond six months from the date on which the notice of revocation is
received by TRA.
- While a waiver is in effect, TRA may process an additional adjustment requested by the
taxpayer provided TRA considers it to be supportable. However, if TRA initiates a
proposal, the reassessment may not include in income for that year any amount that:
a) was not included in income in an assessment before the normal reassessment period
expired; and
b) the taxpayer establishes does not relate to the matter specified in the waiver.
Loss Carry-backs
- A reassessment may be processed within three years after the normal reassessment period
has expired if the corporation is claiming a loss carried back from a subsequent year.
(See Information Circular CT-7, "Calculation and Deduction of
Losses" for details relating to deducting losses from a subsequent year.) The
reassessment may only include the amount that relates to the loss carry-back.
Reassessments
Made in Other Jurisdictions
- Even though the normal reassessment period has expired, a reassessment to a taxation
year (the "reassessed year") may be made within 12 months after an assessment or
reassessment by CRA, the Ontario Ministry of Finance, or the Quebec Ministry of
Revenue for that year. The other jurisdiction's action may have included a revision to a
loss calculated for the reassessed year. If the loss had been deducted in another year for
which the normal reassessment period has expired, that year may also be reassessed, within
the same 12-month period of the reassessed year, to reflect the revised loss. The
reassessment may only include amounts that reasonably relate to the adjustment made by the
other jurisdiction and the affect of those adjustments on the calculation of Alberta tax
and credits.
Failure to Refile Information
- If a corporation has been assessed by another jurisdiction, discovers an error on a
previously filed return (within the normal reassessment period), or believes that it was
exempt from filing a return and subsequently determines that it was not exempt, the
corporation must advise TRA of the other jurisdiction's assessment or file an amended
return or a return, as the case may be.
In such cases, the normal reassessment period
may be extended indefinitely until the corporation provides the required information to
TRA. Once the information is provided to TRA, the normal 12 month reassessment period
applies for TRA.
Misrepresentation or Fraud
- A reassessment may be made at any time if the taxpayer has made a misrepresentation that
is attributable to neglect, carelessness or wilful default or has committed any fraud in
the filing of a return or in supplying information. Where a year is being reassessed due
to misrepresentation or fraud, TRA may not include in income for that year, any amount
that was not included in income in an assessment before the normal reassessment period
expired and that the taxpayer establishes does not relate to the misrepresentation or
fraud. However, the reassessment may include an adjustment requested by the taxpayer
provided TRA agrees that it is valid.
Alberta Energy Adjustment
- After November 15, 1993, a reassessment may be made after the normal reassessment period
of a taxation year (the "affected year") if the corporation's Alberta crown
royalty amount changes due to an adjustment made by Alberta Energy. The affected year must
be reassessed within the normal reassessment period of the year in which the corporation
is notified by Alberta Energy of the adjustment. The reassessment may only include an
amount that reasonably relates to Alberta Energy's adjustment.
Resulting from a
Reassessment to Another Taxation Year
- In assessing or reassessing a taxation year (the "initial year"), the balance
of an account may change for that year. An amount from this account may have been carried
over to another year (the "other year") or had a direct effect on the
calculation of tax in the other year. At the taxpayer's written request or, upon TRA's
initiative, the other year will be reassessed even though the normal reassessment period
for that year has expired. The following conditions apply:
a) the reassessment to the initial year must have been made after December 20, 1991;
b) the reassessment to the other year must be made after June 10, 1993 but within one
year after the day on which all rights of objection or appeal expire for the initial year;
and
c) the reassessment for the other year may only include any amount that reasonably
relates to the change in the balance of the account.
- A reassessment may be made at any time when it results from the resolution of an
objection or appeal.
- As part of the resolution of the objection or appeal, the taxpayer may request an
adjustment be made to an amount that was not under objection or appeal. Provided TRA
considers the adjustment to be supportable, the taxpayer's request will be processed if
the reassessment to which the taxpayer has objected was made under one of the following
situations:
a) within the normal reassessment period;
b) under waiver; or
c) as a result of misrepresentation or fraud.
- Where the taxpayer objects to a reassessment that was issued after the normal
reassessment period under one of the provisions described below, the taxpayer may only
object to an issue that gave rise to that reassessment. Upon resolution of the objection
or appeal, any reassessment made may only include an amount that reasonably relates to the
issue under objection. This applies to reassessments made:
a) within three years of the normal reassessment period, as a result of a loss carried
back from a subsequent year;
b) within 12 months of a reassessment made by
CRA, the Ontario Ministry of
Finance or the Quebec Ministry of Revenue;
c) as a result of adjustments made by Alberta Energy to the corporation's Alberta crown
royalty;
d) as a result of a reassessment to another taxation year as described in paragraph 22;
e) as a result of the resolution of an objection or appeal; or
f) as a result of an order of a court.
- When information related to a corporation
is received from one of the sources discussed in this circular,
TRA updates its records accordingly. A notice of reassessment
may not be issued to reflect these actions if the net effect to
Alberta tax, interest, and penalties is minimal.
- If, as the result of a reassessment,
a taxpayer's account has a balance of less than $20.00, TRA will
not charge nor refund the balance unless specifically requested
to do so.
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