COVID-19: What You Need to Know About Tax Disputes

In the face of the COVID-19 pandemic, courts and government agencies are rapidly adapting their practices and procedures, either by adjourning hearings, suspending deadlines or moving to fully digital methods.

Updated April 29, 2020: the changes made can be found hereafter, in italics.

Below is a summary of the measures adopted by courts and tax agencies in tax matters.

New Procedures for Audits and Collection

According to the information obtained, the Canada Revenue Agency ("CRA") suspended services deemed "non-essential". Essential services include processing benefit payments (including processing returns and responding to related calls), as well as government responses to the COVID-19 pandemic and related internal CRA issues.

As a result of changes to CRA announcements dated March 27, 2020, there is a suspension of audit activities. The CRA will not contact taxpayers for audit purposes, with a few exceptions. As a result, there will be no new audit launches and no enquiries about ongoing audits.

Taxpayers will now have until June 1st, 2020, to complete most tax-related paperwork that was due after March 18, 2020, including information to be provided to the CRA for audit purposes. If this information is absolutely necessary, the CRA will contact affected taxpayers to provide them with a new due date.

Finally, collection for new debts are suspended until further notice. Refund terms are available on a case-by-case basis for taxpayers who are unable to pay tax, Canada Child Allowance and Family Benefits overpayments, Canada Student Loans, or other overpayments of government programs.

Similar measures have been put in place by the Quebec Revenue Agency ("QRA"). 

Other Measures Put in Place by the Agence du revenu du Québec

On April 6, 2010, ARQ announced that it was extending to June 1, 2020 the deadline applicable to all administrative tax measures (other than tax returns subject to a deferral to a specific date), which would expire during the period from March 17, 2020 to May 31, 2020. The ARQ refers to the following "administrative tax measures" as examples:

• corporate tax returns;
• elections provided for under Quebec tax legislation or regulations, such as a rollover (with the exception of QST elections that are harmonized with the GST);
• application for a tax credit on presentation of documents (12-month deadline);
• application for a fuel tax refund;
• responding to requests for information from Revenu Québec;
• mandatory or preventive disclosure of aggressive tax planning;
• application for the Quebec Education Savings Incentive - QESI (90-day deadline);
• status of agents.

New Deadline for Sales Taxes (GST and QST)

The federal government has announced that it is extending the filing deadline for GST/HST returns and related payments due from March 27, 2020, to June 1^st, 2020. In these cases, the deadline is extended to June 30, 2020.

The government of Québec has also announced an extension of the filing deadline for QST returns to June 30, 2020, as well as related payments, if any, for all QST returns due from March 27, 2020 to June 1^st, 2020. As for the reporting periods for which the filing deadlines are after June 1^st, 2020, the filing and payment deadlines provided for in the tax legislation will apply. Consequently, as a result of the application of this measure, it is possible that some taxpayers  may file several separate returns at the same time.

It is important to note that, for the time being, obligations to file returns and to remit or pay amounts in respect of other Quebec taxes, source deductions or employer contributions are not covered by the current measures.

What About Objections?

As of April 21, 2020, the treatment of objections related to Canadians' entitlement to benefits and credits, GST refunds, and scientific research and experimental development claims has been identified as a critical service that will continue to be provided during the COVID-19 pandemic. Therefore, there should be no delay in processing these objections. 

Concerning objections related to other tax matters filed by individuals and businesses, the CRA has put these accounts on hold. The CRA will not take any collection action on these accounts during this period. The deadline for filing an objection due between March 18, 2020 and June 30, 2020 is extended to June 30, 2020. Therefore, time extensions should follow the same rules. 

With respect to notices of objection to be filed with the ARQ, the end of the 90-day period for filing an objection that expires in the period beginning March 13, 2020 and ending June 29, 2020 is extended to June 30, 2020.

New Deadlines for the Tax Court of Canada

The Tax Court of Canada ("TCC") extends the recess to May 29, 2020, including conference calls. The suspension periods applicable with respect to the application of the Tax Court of Canada Rules cover the period from March 16, 2020 to May 29, 2020 inclusively, meaning that these periods are excluded from any computation. Sittings after May 29 are continued and the TCC has undertaken to contact counsel as soon as possible to reschedule the sittings.

As for other statutory time limits which are not within the jurisdiction of the TCC, these continue to run and parties may file their documents, including requests for extensions of time, either electronically through the TCC's e-filing system or by fax at 613 957-9034, in order to protect their rights. Parties filing electronically during this period are exempted from submitting their documents in paper form.

A Stay Period for the Federal Court and the Federal Court of Appeal

All Federal Court ("FC") hearings scheduled to take place between March 18, 2020 and April 17, 2020 are now adjourned sine die. These hearings include those that were scheduled to proceed by conference call. The general sittings to be held during this period of recess are also cancelled. Hearings already scheduled for general sittings during this period are rescheduled for the first general sittings held for the same city at least two weeks after the suspension period.

There are two exceptions to the period of suspension:

• urgent matters; and
• cases which must be heard on the dates already fixed for exceptional reasons.

The FC will determine on a case-by-case basis whether a case is urgent or exceptional.

All time limits prescribed by an order or direction of the FC made before March 18, 2020 under the Federal Courts Rules, as well as subsection 18.1(2) of the Federal Courts Act, are suspended during the period of suspension. All other statutory time limits will continue to run. If the parties are unable to meet a time limit under any other applicable law due to exceptional circumstances, they may apply to the FC for an extension of the time limit. To do so, however, they will have to wait until the end of the suspension period.

In an effort to move the matters forward, the FC recently agreed to amend the practice directive as follows:

• the extension of the previously announced suspension period to May 15, 2020;
• the resumption of case management hearings presided over by a case management judge, which may be conducted by telephone or video conference;
• the expansion of matters that may be heard on consent by conference call, video conference or in writing;
• a procedure for rescheduling hearings that have been adjourned or may be adjourned due to the period of recess;
• the waiver of certain filing fees, effective April 6, 2020, until the end of the suspension period, and the deferral of the requirement to pay certain other filing fees;
• a process for confidential documents filing;
• deemed consent to electronic service of documents;
• remote swearing-in of declarations;
• an undertaking by the Court to deal, over the summer, with cases adjourned during the period of recess. To this end, the usual two small weeks during the summer will be waived;
• the suspension of the requirement to wear a robe.

Postponement for Trial Dates Before the Court of Québec

At the level of the Court of Québec, Administrative and Appeal Division, the process for postponing a hearing date on the merits of the appeal or contestation is suspended. All hearings on the merits scheduled for March and April 2020 are postponed to a later date to be set by the judge responsible for the file after consultation with the parties. Urgent cases and certain telephone management conferences are maintained.

More particularly, with respect to assessment appeals before the Court of Québec, the time limits applicable to these appeals are suspended from March 15, 2020 until the expiry of the state of health emergency (the date of which is modified according to the decrees published).

This suspension applies to the following procedures:

• appeals of assessment filed with the Court of Québec;
•  appeals of assessment filed with the Small Claims Division of the Court of Quebec;
• demands for review of a decision of the Minister of Revenue refusing to extend the time limit for filing an objection;
•  demands for an extension of time to file an appeal or a summary appeal.

To help you find a solution that meets your needs, read the article our team has prepared regarding the main measures deployed by governments and financial institutions.

For the past 25 years, BCF's mission has been to support Québec businesses. We understand the issues you are facing and our Tax team is available to help you benefit from the resources at your disposal and minimize the tax impact of the COVID-19 pandemic. Please do not hesitate to contact us for support on the applicability of these measures.