Choix En TPS/TVH : 'tre En Retard N'est Pas Toujours À La Mode

• Published date: 06 July 2020
• Subject Matter: Tax, Compliance, Sales Taxes: VAT, GST
• Law Firm: Stikeman Elliott LLP
• Author: Mr Jean-Guillaume Shooner

Dans la décision récente Denso Manufacturing Canada, Inc. c. Canada (Revenu national), 2020 CF 360, la Cour fédérale a jugé que le ministre du Revenu national (le ' Ministre ') avait agi raisonnablement dans l'exercice de son pouvoir discrétionnaire en refusant la production tardive du choix effectué par deux sociétés canadiennes étroitement liées, Denso Manufacturing Canada Inc. (' Denso Manufacturing ') et Denso Sales Canada, Inc (' Denso Sales, et collectivement avec Denso Manufacturing, ' Denso Corporations').

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In the recent decision Denso Manufacturing Canada Inc. v. Canada (National Revenue), 2020 FC 360, the Federal Court ruled that the Minister of National Revenue ('Minister') had acted reasonably in exercising its discretionary right to deny a late-filed GST/HST election between two closely related Canadian corporations, Denso Manufacturing Canada, Inc. ('Denso Manufacturing') and Denso Sales Canada, Inc. ('Denso Sales', and collectively with Denso Manufacturing, 'Denso Corporations').

• A joint election under section 156 of the Excise Tax Act (Canada) ('ETA') deems all taxable supplies made between closely related corporations to have been made for nil consideration so that no GST/HST is collectible on such supplies ('156 Election').
• Ignorance of the law is not a valid excuse for the late filing of a 156 Election and, in the absence of an explanation that does not amount to negligence or carelessness the Minister may exercise its discretion to deny such late filings.

Background

Denso Manufacturing and Denso Sales are closely related corporations for purposes of the 156 Election. Prior to the amendments to section 156 effective January 1, 2015 ('Amendment')¹, the Denso Corporations made the election by completing Form GST25 and keeping it with their records. However, as a result of the Amendment, parties to an existing 156 Election were required to file the new prescribed Form RC4616 before January 1, 2016 for the election to continue to be in effect in 2015. The Denso Corporations failed to file Form RC4616 on time.

In January 2016, the Canada Revenue Agency ('CRA') reviewed the Denso Corporations' GST/HST returns for the November and December 2015 periods and later informed them of their non-compliance with the new filing requirements of section 156 of the ETA.

Discussions with their tax advisors led the Denso Corporations to believe that their existing 'unfiled' 156 Election already covered the...