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

Full Document:  

Act current to 2019-06-20 and last amended on 2019-06-17. Previous Versions

PART IXGoods and Services Tax (continued)

DIVISION VIIIAdministration and Enforcement (continued)

SUBDIVISION BReturns, Penalties and Interest (continued)

Marginal note:False statements or omissions

 Every person who knowingly, or under circumstances amounting to gross negligence, makes or participates in, assents to or acquiesces in the making of a false statement or omission in a return, application, form, certificate, statement, invoice or answer (each of which is in this section referred to as a “return”) made in respect of a reporting period or transaction is liable to a penalty of the greater of $250 and 25% of the total of

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

    A - B

    where

    A
    is the net tax of the person for the period, and
    B
    is the amount that would be the net tax of the person for the period if the net tax were determined on the basis of the information provided in the return,
  • (b) if the false statement or omission is relevant to the determination of an amount of tax payable by the person, the amount, if any, by which

    • (i) that tax payable

    exceeds

    • (ii) the amount that would be the tax payable by the person if the tax were determined on the basis of the information provided in the return, and

  • (c) if the false statement or omission 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 person if the rebate were determined on the basis of the information provided in the return

    exceeds

    • (ii) the amount of the rebate payable to the person.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • 1990, c. 45, s. 12
  • 2000, c. 30, s. 84

Marginal note:Definitions

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

    electronic cash register

    electronic cash register means a device that keeps a register or supporting documents through the means of an electronic device or computer system designed to record transaction data or any other electronic point-of-sale system. (caisse enregistreuse électronique)

    electronic suppression of sales device

    electronic suppression of sales device means

    • (a) a software program that falsifies the records of electronic cash registers, including transaction data and transaction reports; or

    • (b) a hidden programming option, whether preinstalled or installed at a later time, embedded in the operating system of an electronic cash register or hardwired into the electronic cash register that

      • (i) may be used to create a virtual second till, or

      • (ii) may eliminate or manipulate transaction records, which may or may not be preserved in digital formats, in order to represent the actual or manipulated record of transactions in the electronic cash register. (appareil de suppression électronique des ventes)

  • Marginal note:Penalty  —  use

    (2) Every person that uses, or that knowingly, or under circumstances attributable to neglect, carelessness or wilful default, participates in, assents to or acquiesces in the use of, an electronic suppression of sales device or a similar device or software in relation to records that are required to be kept by any person under section 286 is liable to a penalty of

    • (a) unless paragraph (b) applies, $5,000; or

    • (b) $50,000 if the action of the person occurs after the Minister has assessed a penalty payable by the person under this section or section 163.3 of the Income Tax Act.

  • Marginal note:Penalty  — possession

    (3) Every person that acquires or possesses an electronic suppression of sales device or a right in respect of an electronic suppression of sales device that is, or is intended to be, capable of being used in relation to records that are required to be kept by any person under section 286 is liable to a penalty of

    • (a) unless paragraph (b) applies, $5,000; or

    • (b) $50,000 if the action of the person occurs after the Minister has assessed a penalty payable by the person under this section or section 163.3 of the Income Tax Act.

  • Marginal note:Penalty  — manufacturing or making available

    (4) Every person that designs, develops, manufactures, possesses for sale, offers for sale, sells, transfers or otherwise makes available to another person, or that supplies installation, upgrade or maintenance services for, an electronic suppression of sales device that is, or is intended to be, capable of being used in relation to records that are required to be kept by any person under section 286 is liable to a penalty of

    • (a) unless paragraph (b) or (c) applies, $10,000;

    • (b) unless paragraph (c) applies, $50,000 if the action of the person occurs after the Minister has assessed a penalty payable by the person under subsection (2) or (3) or subsection 163.3(2) or (3) of the Income Tax Act; or

    • (c) $100,000 if the action of the person occurs after the Minister has assessed a penalty payable by the person under this subsection or subsection 163.3(4) of the Income Tax Act.

  • Marginal note:Limitation

    (5) Despite section 296, if at any time the Minister assesses a penalty payable by a person under this section, the Minister is not to assess, at or after that time, another penalty payable by the person under this section that is in respect of an action of the person that occurred before that time.

  • Marginal note:Certain defences not available

    (6) Except as otherwise provided in subsection (7), a person does not have a defence in relation to a penalty assessed under this section by reason that the person exercised due diligence to prevent the action from occurring.

  • Marginal note:Diligence

    (7) A person is not liable for a penalty under subsection (3) or (4) in respect of an action of the person if the person exercised the degree of care, diligence and skill that a reasonably prudent person would have exercised in comparable circumstances to prevent the action from occurring.

  • Marginal note:Assessment vacated

    (8) For the purposes of this section, if an assessment of a penalty under this section is vacated, the penalty is deemed to have never been assessed.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • 2013, c. 40, s. 121

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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