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Excise Tax Act (R.S.C., 1985, c. E-15)

Full Document:  

Act current to 2023-01-25 and last amended on 2022-12-15. Previous Versions

PART IXGoods and Services Tax (continued)

DIVISION VIIIAdministration and Enforcement (continued)

SUBDIVISION BReturns, Penalties and Interest (continued)

Marginal note:Penalty

 In addition to any other penalty under this Part, the recipient of a supply of property or a service that evades or attempts to evade the payment or collection of tax payable by the recipient under Division II in respect of the supply by providing false information to a particular person that is registered or required to be registered under Subdivision E of Division II or, if the recipient is a consumer of the property or service, by providing to the particular person evidence that the recipient is registered under Subdivision D of Division V is liable to pay a penalty equal to the greater of $250 and 50% of the amount of tax that has been evaded or attempted to be evaded.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • 2021, c. 23, s. 110

Marginal note:Definitions

  •  (1) The following definitions apply in this section.

    gross entitlements

    gross entitlements of a person at any time, in respect of a planning activity of the person, means all amounts to which the person, or another person not dealing at arm’s length with the person, is entitled, either before or after that time and either absolutely or contingently, to receive or obtain in respect of the activity. (droits à paiement)

    planning activity

    planning activity has the same meaning as in subsection 285.1(1). (activité de planification)

    section 325 avoidance planning

    section 325 avoidance planning, by a person, means a planning activity in respect of a transaction or series of transactions that meets the following conditions:

    • (a) the transaction or series of transactions is, or is part of, a section 325 avoidance transaction; and

    • (b) one of the purposes of the transaction or series of transactions is to

      • (i) reduce a transferee’s joint and several, or solidary, liability under section 325 for an amount payable or remittable under this Part by a transferor or for an amount that would be payable or remittable by the transferor but for a transaction or series of transactions in which an amount, that is or may be relevant in determining any obligations or entitlements under this Part of a person that dealt at arm’s length with the transferor or transferee immediately before the transaction or series of transactions, is used directly or indirectly to provide a tax benefit for the transferor or transferee, or

      • (ii) reduce the person or another person’s ability to pay any amount payable or remittable, or that may become payable or remittable, under this Part. (planification d’évitement de l’article 325)

    section 325 avoidance transaction

    section 325 avoidance transaction means a transaction or series of transactions in respect of which

    • (a) the conditions in paragraph 325(5)(a) or (b) are met; or

    • (b) if subsection 325(5) applied to the transaction or series of transactions, the amount determined under subparagraph 325(5)(c)(ii) would exceed the amount determined under subparagraph 325(5)(c)(i). (opération d’évitement de l’article 325)

    tax benefit

    tax benefit has the same meaning as in subsection 285.1(1). (avantage fiscal)

    transaction

    transaction includes an arrangement or event. (opération)

  • Marginal note:Penalty

    (2) Every person that engages in, participates in, assents to or acquiesces in a planning activity that they know is section 325 avoidance planning, or would reasonably be expected to know is section 325 avoidance planning, but for circumstances amounting to gross negligence, is liable to a penalty equal to the lesser of

    • (a) 50% of the amount payable or remittable under this Part in respect of which the joint and several, or solidary, liability was sought to be avoided through the planning, and

    • (b) the total of $100,000 and the person’s gross entitlements in respect of the planning at the time at which the notice of assessment of the penalty is sent to the person in respect of the planning.

  • Marginal note:Clerical or secretarial services

    (3) Subsection (2) does not apply to a person solely because the person provided clerical services or secretarial services with respect to the planning.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • 2022, c. 19, s. 61

Marginal note:Definitions

  •  (1) The definitions in this subsection apply in this section.

    culpable conduct

    culpable conduct means conduct, whether an act or a failure to act, that

    • (a) is tantamount to intentional conduct;

    • (b) shows an indifference as to whether this Part is complied with; or

    • (c) shows a wilful, reckless or wanton disregard of the law. (conduite coupable)

    entity

    entity includes an association, a corporation, a fund, a joint venture, an organization, a partnership, a syndicate and a trust. (entité)

    excluded activity

    excluded activity, in respect of a false statement, means the activity of

    • (a) promoting or selling (whether as principal or agent or directly or indirectly) an arrangement, an entity, a plan, a property or a scheme (in this definition referred to as the “arrangement”) where it can reasonably be considered that one of the main purposes for a person’s participation in the arrangement is to obtain a tax benefit; or

    • (b) accepting (whether as principal or agent or directly or indirectly) consideration in respect of the promotion or sale of an arrangement. (activité exclue)

    false statement

    false statement includes a statement that is misleading because of an omission from the statement. (faux énoncé)

    gross compensation

    gross compensation of a particular person at any time, in respect of a false statement that could be used by or on behalf of another person, means all amounts to which the particular person, or any person not dealing at arm’s length with the particular person, is entitled, either before or after that time and either absolutely or contingently, to receive or obtain in respect of that statement. (rétribution brute)

    gross entitlements

    gross entitlements of a person at any time, in respect of a planning activity or a valuation activity of the person, means all amounts to which the person, or another person not dealing at arm’s length with the person, is entitled, either before or after that time and either absolutely or contingently, to receive or obtain in respect of the activity. (droits à paiement)

    participate

    participate includes

    • (a) to cause a subordinate to act or to omit information; and

    • (b) to know of, and to not make a reasonable attempt to prevent, the participation by a subordinate in an act or an omission of information. (participer)

    planning activity

    planning activity includes

    • (a) organizing or creating, or assisting in the organization or creation of, an arrangement, an entity, a plan or a scheme; and

    • (b) participating, directly or indirectly, in the selling of an interest in, or in the promotion of, an arrangement, an entity, a plan, a property or a scheme. (activité de planification)

    property

    property has the meaning assigned by subsection 248(1) of the Income Tax Act. (bien)

    subordinate

    subordinate, in respect of a particular person, includes any other person over whose activities the particular person has direction, supervision or control whether or not the other person is an employee of the particular person or of another person, except that, if the particular person is a member of a partnership, the other person is not a subordinate of the particular person solely because the particular person is a member of the partnership. (subalterne)

    tax benefit

    tax benefit means a reduction, avoidance or deferral of tax, net tax or other amount payable under this Part or an increase in a refund or rebate under this Part. (avantage fiscal)

    valuation activity

    valuation activity of a person means anything done by the person in determining the value of a property or a service. (activité d’évaluation)

  • Marginal note:Penalty for misrepresentations in tax planning arrangements

    (2) Every person who makes or furnishes, participates in the making of or causes another person to make or furnish a statement that the person knows, or would reasonably be expected to know but for circumstances amounting to culpable conduct, is a false statement that could be used by another person (in subsections (6) and (15) referred to as the “other person”) for a purpose of this Part is liable to a penalty in respect of the false statement.

  • Marginal note:Amount of penalty

    (3) The penalty to which a person is liable under subsection (2) in respect of a false statement is

    • (a) if the statement is made in the course of a planning activity or a valuation activity, the greater of $1,000 and the total of the person’s gross entitlements, at the time at which the notice of assessment of the penalty is sent to the person, in respect of the planning activity and the valuation activity; and

    • (b) in any other case, $1,000.

  • Marginal note:Penalty for participating in a misrepresentation

    (4) Every person who makes, or participates in, assents to or acquiesces in the making of, a statement to, or by or on behalf of, another person (in this subsection, subsections (5) and (6), paragraph (12)(c) and subsection (15) referred to as the “other person”) that the person knows, or would reasonably be expected to know but for circumstances amounting to culpable conduct, is a false statement that could be used by or on behalf of the other person for a purpose of this Part is liable to a penalty in respect of the false statement.

  • Marginal note:Amount of penalty

    (5) The penalty to which a person is liable under subsection (4) in respect of a false statement is the greater of

    • (a) $1,000, and

    • (b) the lesser of

      • (i) the total of $100,000 and the person’s gross compensation, at the time at which the notice of assessment of the penalty is sent to the person, in respect of the false statement that could be used by or on behalf of the other person, and

      • (ii) 50% of the total of all amounts each of which is

        • (A) if the false statement is relevant to the determination of net tax of the other person for a reporting period, the amount determined by the formula

          A - B

          where

          A
          is the net tax of the other person for the period, and
          B
          is the amount that would be the net tax of the other person for the period if the statement were not a false statement,
        • (B) if the false statement is relevant to the determination of an amount of tax payable by the other person, the amount, if any, by which

          • (I) that tax payable

          exceeds

          • (II) the amount that would be the tax payable by the other person if the statement were not a false statement, and

        • (C) if the false statement is relevant to the determination of a rebate under this Part, the amount, if any, by which

          • (I) the amount that would be the rebate payable to the other person if the statement were not a false statement

          exceeds

          • (II) the amount of the rebate payable to the other person.

  • Marginal note:Reliance in good faith

    (6) For the purposes of subsections (2) and (4), a person (in this subsection and in subsection (7) referred to as the “advisor”) who acts on behalf of the other person is not considered to have acted in circumstances amounting to culpable conduct in respect of the false statement referred to in subsection (2) or (4) solely because the advisor relied, in good faith, on information provided to the advisor by or on behalf of the other person or, because of such reliance, failed to verify, investigate or correct the information.

  • Marginal note:Non-application of subsection (6)

    (7) Subsection (6) does not apply in respect of a statement that an advisor makes, or participates in, assents to or acquiesces in the making of, in the course of an excluded activity.

  • Marginal note:False statements in respect of a particular arrangement

    (8) For the purpose of applying this section (other than subsections (4) and (5)),

    • (a) where a person makes or furnishes, participates in the making of or causes another person to make or furnish two or more false statements, the false statements are deemed to be one false statement if the statements are made or furnished in the course of

      • (i) one or more planning activities that are in respect of a particular arrangement, entity, plan, property or scheme, or

      • (ii) a valuation activity that is in respect of a particular property or service; and

    • (b) for greater certainty, a particular arrangement, entity, plan, property or scheme includes an arrangement, an entity, a plan, a property or a scheme in respect of which one of the main purposes for a person’s participation in the arrangement, entity, plan or scheme, or a person’s acquisition of the property, is to obtain a tax benefit.

  • Marginal note:Clerical services

    (9) For the purposes of this section, a person is not considered to have made or furnished, or participated in, assented to or acquiesced in the making of, a false statement solely because the person provided clerical services (other than bookkeeping services) or secretarial services with respect to the statement.

  • Marginal note:Valuations

    (10) Despite subsection (6), a statement as to the value of a property or a service (which value is in this subsection referred to as the “stated value”), made by the person who opined on the stated value or by a person in the course of an excluded activity is deemed to be a statement that the person would reasonably be expected to know, but for circumstances amounting to culpable conduct, is a false statement if the stated value is

    • (a) less than the product obtained when the prescribed percentage for the property or service is multiplied by the fair market value of the property or service; or

    • (b) greater than the product obtained when the prescribed percentage for the property or service is multiplied by the fair market value of the property or service.

  • Marginal note:Exception

    (11) Subsection (10) does not apply to a person in respect of a statement as to the value of a property or service if the person establishes that the stated value was reasonable in the circumstances and that the statement was made in good faith and, where applicable, was not based on one or more assumptions that the person knew or would reasonably be expected to know, but for circumstances amounting to culpable conduct, were unreasonable or misleading in the circumstances.

  • Marginal note:Special rules

    (12) For the purpose of applying this section,

    • (a) where a person is assessed a penalty that is referred to in subsection (2) the amount of which is based on the person’s gross entitlements at any time in respect of a planning activity or a valuation activity and another assessment of the penalty is made at a later time,

      • (i) if the person’s gross entitlements in respect of the activity are greater at that later time, the assessment of the penalty made at that later time is deemed to be an assessment of a separate penalty, and

      • (ii) in any other case, the notice of assessment of the penalty sent before that later time is deemed not to have been sent;

    • (b) a person’s gross entitlements at any time in respect of a planning activity or a valuation activity, in the course of which the person makes or furnishes, participates in the making of or causes another person to make or furnish a false statement, shall exclude the total of all amounts each of which is the amount of a penalty (other than a penalty the assessment of which is void because of subsection (13)) determined under paragraph (3)(a) in respect of the false statement for which notice of the assessment was sent to the person before that time; and

    • (c) where a person is assessed a penalty that is referred to in subsection (4), the person’s gross compensation at any time in respect of the false statement that could be used by or on behalf of the other person shall exclude the total of all amounts each of which is the amount of a penalty (other than a penalty the assessment of which is void because of subsection (13)) determined under subsection (5) to the extent that the false statement was used by or on behalf of that other person and for which notice of the assessment was sent to the person before that time.

  • Marginal note:Assessment void

    (13) For the purposes of this Part, if an assessment of a penalty that is referred to in subsection (2) or (4) is vacated, the assessment is deemed to be void.

  • Marginal note:Maximum penalty

    (14) A person who is liable at any time to a penalty under both subsections (2) and (4) in respect of the same false statement is liable to pay a penalty that is not more than the greater of

    • (a) the total amount of the penalties to which the person is liable at that time under subsection (2) in respect of the statement, and

    • (b) the total amount of the penalties to which the person is liable at that time under subsection (4) in respect of the statement.

  • Marginal note:Employee

    (15) If an employee (other than a specified employee, as defined in subsection 248(1) of the Income Tax Act, or an employee engaged in an excluded activity) is employed by the other person referred to in subsections (2) and (4)

    • (a) subsections (2) to (5) do not apply to the employee to the extent that the false statement could be used by or on behalf of the other person for a purpose of this Part; and

    • (b) the conduct of the employee is deemed to be that of the other person for the purpose of applying section 285 to the other person.

  • Marginal note:Burden of proof in respect of penalties

    (16) If, in an appeal under this Part, a penalty assessed by the Minister under this section or section 285 is in issue, the burden of establishing the facts justifying the assessment of the penalty is on the Minister.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • 2000, c. 19, s. 70
 
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