Taxpayer Relief on Account of Natural Disasters

Many Canadians are not aware that taxpayer relief could be available to them in circumstances where the taxpayers are late when filing their GST returns or in remitting the required GST as a result of the disruptions that are caused by natural calamities and disasters.

Natural disasters could strike anywhere. You can take the example of the worst flooding that Alberta was affected a while ago. It is important to note that, as far as tax obligations are concerned, if you are unable to fulfill your tax obligations due to any natural disaster like flooding, taxpayer relief may be available to you from the CRA.

The Canada Revenue Agency has also reminded the taxpayers in the country of the availability of the provisions of taxpayer relief to them in respect of the flooding some seven months ago. There is a taxpayer relief provided for corporations who were unable to file the T2 taxation returns. The taxpayer relief provisions are available to all the taxpayers and they will include individuals, organizations, partnerships, trusts and also the GST/HST registrants.

In normal circumstances, when a taxpayer does not file the tax returns and remit the correct sum of taxes to the CRA as it is required by law, he or she is going to be subject to a specific penalty of a fixed sum along with the interest charges on the balance of the tax amount outstanding. The taxpayer relief provisions allow for the cancellation or the waiver of interest and the penalties in part or in full.

The cancellation will refer to the interest and the penalties which have already been assessed for which the taxpayer relief is granted while the waiver will refer to the interest and the penalties that have not been assessed yet for which the relief is granted.  The taxpayer relief provisions are not restricted to any particular situation although CRA has made it clear in its publications that the provisions will apply in three broad categories. These are:

  1. Circumstances which are beyond the control of the taxpayer including events such as natural disasters.
  2. Errors or mistakes committed on part of the CRA’s actions.
  3. Inability to pay by the taxpayer on account of financial hardship.

The taxpayer relief provisions are not applied by the CRA automatically. The taxpayer has to request the application of these provisions as per the category of the `Circumstance’ and it has to be applied on CRA’s required form along with the contact information, Social Insurance Number or the GST/HST Registration Number, the taxation years that are involved, giving full details of the facts and the reasons behind the Circumstance. The details will have to include how the circumstance has had an impact on your ability to meet the tax obligations with relevant documentation as a support. It has to be accompanied by planned steps that will be taken to resolve the inability to comply.

For taxpayer relief periods, initially CRA allowed only past ten years of tax owing and would disallow relief request for any tax debts owed more than ten years ago. Recent court case changed the direction and forced CRA to extend the time period to more than ten years. However, the penalties or interest relief only applies to last ten year taxes owed although the tax debts was started more than ten years ago.