November 23rd, 2023
Details concerning a proposed amendment to subsection 298(1) of the ETA can be found in the explanatory notes concerning the goods and services tax/harmonized sales tax, excise duties, and other taxes published by the Deputy Prime Minister and Minister of Finance on August 4, 2023. The purpose of this amendment is to implement an exception to the general four-year limitation period for a net tax assessment. This period increases from 4 to 7 years for selected listed financial institutions and applies in respect of an amount of tax payable under section 218.01 of the ETA. This article covers the payment of GST/HST on imported taxable supplies. The amendment to subsection 298(1) of the ETA is deemed to have come into force on August 4, 2023.
Why this change?
We believe that the Minister’s objective in making this amendment is to ensure that GST/HST revenues payable by large financial institutions that are generally not eligible to claim ITCs on GST/HST payable on the importation of goods and services from outside Canada are not lost. These imports of goods and services often involve internal charges from financial institutions operating in and outside Canada.
Our hypothesis is that CRA auditors have identified significant amounts of GST/HST payable by these financial institutions in relation to the importation of taxable goods and services for which the 4-year time limit to issue the assessment had passed, and the Minister of Finance wants to ensure that this revenue is not lost in the future.
What is the impact of the change?
This change could be very costly, particularly in terms of interest and penalties, for affected financial institutions, if significant amounts of GST/HST payable were assessed by the CRA for a period going back 7 years.
Recommendations to targeted financial institutions
- Ensure that the processes put in place for self-assessment are effective, in particular through internal or external review.
- Minimize purchases of goods and services from outside Canada.
