The CRA will hold refunds for GST non-compliance starting in May 2017.
While the CRA currently puts some non-compliance holds on refunds, it recently announced that it will apply a non-compliance hold to all GST/HST registrants that have outstanding tax returns. As a result of this change, taxpayers should ensure they file all the GST/HST returns on time to avoid the administrative burden of non-compliance holds on their eligible refunds.
Although the CRA has noted that the non-compliance hold will be removed once the outstanding returns are filed, it's not yet clear how long it may take for the refund to be issued once a taxpayer becomes complaint.
The GST/HST rules generally provide that the CRA shall not pay a refund or rebate to a person unless it has filed all of its returns under the GST/HST law, the Income Tax Act, the Excise Act 2001 and the Air Travellers Security Charge Act. Similar provisions are included in these other statutes.
As a result, a GST/HST registrant that fails to file a GST/HST return or a GST/HST annual information return will likely not have its refunds paid out under the GST/HST rules, as well as any other refunds under the Income Tax Act or any other statutes listed above.
Taxpayers - Respond or risk putting refunds on hold
Taxpayers are required to respond to CRA's requests for information and returns, even if they may not be required to file the particular requested return. Taxpayers that do not properly respond to the CRA may be identified as non-compliant GST/HST registrants and eligible refunds may be withheld. Penalties can also apply to taxpayers who fail to provide information or answer a demand to file as requested by the CRA.
For example, the CRA recently contacted taxpayers about outstanding GST/HST annual information returns, including entities that were exempt from filing these returns (i.e., form RC7291 "GST/HST and QST Annual Information Return for Selected Listed Financial Institutions" or form GST111 "Financial Institution GST/HST Annual Information Return"). Although these entities met certain conditions and were considered exempt from this filing, they still had to follow up with the CRA, since the CRA's systems would otherwise likely identify the entities as non-compliant GST/HST registrants and as such may be subject to a hold on eligible refunds.
For more information, contact your KPMG adviser.
Information is current to April 25, 2017. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500