Canada’s Excise Tax Act gives sweeping powers to the Canada Revenue Agency (“CRA”), and by extension its tax collection officers, to collect the tax debts of taxpayers. In many cases, taxpayers are taken by surprise when their bank accounts are frozen, assets liened or seized and wages garnisheed. However there are certain limitations on when the CRA can legally take action to collect GST/HST tax debt, which are both situational and based upon strict timeframes. Unlike most debts under the Income Tax Act, there is no initial 90 day period where collection action is barred after a GST/HST assessment. There is however a 10 year limitation period that applies to GST/HST tax debts. This limitation period is ‘restarted’ whenever the CRA takes action to collect the debt or the taxpayer acknowledges the tax debt, which can mean that a GST/HST debt more than 10 years old is still collectible. If you need help dealing with CRA tax collectors, one of our expert Canadian GST/HST tax lawyers can help.
When a taxpayer is assessed or reassessed in the normal course, a tax debt to the CRA is legally created if there are taxes owing as a result of the tax assessment. Unlike for income tax debts, the CRA can proceed with collections actions for GST/HST tax debts immediately after sending a notice of assessment or notice of reassessment to the taxpayer. If you have been reassessed for GST/HST, our top Canadian GST/HST tax lawyers
The Excise Tax Act at subsection 313(2.1) provides that the CRA may not commence or continue an action to collect a tax debt after the end of the limitation period for the collection of the debt. The prescribed limitation period in the Excise Tax Act is 10 years; this means that after 10 years, the Canada Revenue Agency is legally prevented from collecting on a tax debt. If your GST/HST debt is less than 10 years old, our experienced Canadian GST/HST tax lawyers can help you deal with the CRA tax collections officer assigned to your case.
However, the Excise Tax Act also specifically allows for the Minister to extend the limitation period by virtue of subsection 313(2.3); the limitation period of 10 years is “reset” if the tax department carries out any action to collect the tax debt, such as sending out a demand to pay letter. Also, if the Minister assesses any third-party in respect of the tax debt, for example a spouse or relative by way of derivative assessment, then the limitation period is reset. In addition, if the taxpayer (or the taxpayer’s legal tax representative) acknowledges the debt, the 10 year limit will again reset. If you are unsure if the limitation period applying to your tax debt has been reset, please contact one of our Canadian GST/HST tax lawyers.
For a more complete example of how the limitation period works, if a tax debt is assessed in 2005, and the CRA takes consistent collections action against the taxpayer until 2015, the Minister has 10 more years from the last date of collection action in 2015 to attempt to collect upon the debt. Essentially, every time that the tax collectors continue with collections action, the 10 year limitation period ‘restarts’. If there is no collection action for a period of 10 years plus one day, no taxpayer (or taxpayer’s legal representative) acknowledging the debt in the past 10 years, and no derivative assessment is issued against a third-party, the CRA will be statute barred by the 10 year limitation period to continue or restart collection action.
However, quite confusingly, all tax debts owed to the CRA before March 3, 2004 were ‘awakened’ by virtue of the addition of subsection 313(2.8) of the Excise Tax Act. This means that all the tax debt owed to the Minister before March 3, 2004, at the very earliest, may expire on March 3, 2014. If any action was commenced during this period before March 3, 2014 for the debt owed before March 3, 2004, then the 10 year limitation period will have been reset.
Defined by section 313(1) of Canada’s Excise Tax Act, a collections action means any action taken to collect a tax debt of a taxpayer. This can include a proceeding in a Court and any action taken by the Canada Revenue agency collectors under Division VIII of Part IX of Canada’s Excise Tax Act. Examples of actions taken by CRA which would constitute a collection action include issuing a demand to file under section 282 of Excise Tax Act or issuing a demand for the tax payer to keep records under section 286 of the Excise Tax Act. If you unsure about if a collection action has been taken to collect your HST tax debt, contact one of our expert Canadian GST/HST tax lawyers.
The only thing that a tax debtor can do to avoid prolonging the period of collection as much as possible is to avoid acknowledging or paying the debt. Defined in subsection 313(2.4) of Canada’s Excise Tax Act, the taxpayer can acknowledge the debt in one of three ways:
Any of these three actions by the taxpayer will result in a “reset” of the limitations period, and the taxpayer will be back to square one. This is another good example of why taxpayers with debts to CRA would be well served to seek professional tax advice from one of our Canadian GST/HST tax lawyers before communicating directly with tax collections officers.
If you owe a debt to Canada Revenue Agency and you are unsure whether the limitation period has passed, get in touch with our expert Canadian GST/HST Tax Lawyers. Our tax law firm can assist you with dealing with Canada Revenue Agency collectors who can be very aggressive with their collection actions. Effective planning and strategy is necessary at all stages of the tax dispute process. Our Canadian tax law firm can give you the counsel and representation that you need to be successful in your dispute, negotiation and settlement with the CRA at each stage of the process, and help ensure you are not paying the CRA more than it is legally entitled to.
Nathaniel completed his Juris Doctor degree at Osgoode Hall Law School and is our senior associate. He articled with us in 2014 and was called to the bar in 2015. He successfully completed all of the requirements of Osgoode’s Taxation Law Curricular Stream
Kevin earned his Juris Doctor from Osgoode Hall Law School and became an articling student in 2017. He has been with us as a tax lawyer since his call to the bar in 2018.
Ian Thomas joined our Toronto tax law firm as an articling student (student at law) in July 2016 and stayed with us upon becoming a Canadian tax lawyer in June 2017. Ian earned his Juris Doctor from Osgoode Hall Law School and graduated in 2016.
Ildi has joined the law firm of Rotfleisch & Samulovitch PC in June, 2000 and brings over 25 years of legal secretarial experience to the firm. She started as a Legal Secretary and after obtaining Certificates from The Institute of Law Clerks of Ontario
Jason earned his undergraduate degree at Wilfrid Laurier University with a History and Classics Double Major with an English Minor and joined our team as a paralegal in 2018.
Denise is our first responder who cheerfully answers the phones and generally interfaces with clients. She has been with us since 2016.
Paul Zhang was a summer student with us in 2018 and joins us as an articling student in 2019.
Jamin Chen joined our tax law firm as an articling student in September 2016 after earning his Juris Doctor from Allard Hall at the University of British Columbia and continued to practice tax law with us after his call to the bar in 2017.