Canada: CRA new rules for Interest Relief based on Bozzer Case

Last Updated: May 17 2017

Ten Year Limitation Period for CRA to Waive Penalties and Interest – Clarifications from Bozzer v. Canada (2011 FCA 186)

CRA Discretion to Waive or Cancel Penalties and Interest

Under the Canadian Income Tax Act the Canada Revenue Agency (the “CRA”) is obligated to collect any and all legitimate taxes, penalties, and interest owing from Canadian taxpayers. Generally the CRA cannot negotiate on those amounts, meaning that it cannot reduce taxes owing. This can seem harsh and unforgiving, particularly in situations where the taxpayer may not have completely been at fault. However there is an exception to this obligation in subsection 220(3.1) of the Tax Act which gives the CRA discretion to waive or cancel all or part of any interest and penalties that have accrued on a tax debt. This means that, while the CRA cannot negotiate on the base amounts of tax debt a taxpayer owes to them, they can use their discretion to waive or cancel all or part of the interest and penalties on a tax debt. Call our experienced Toronto tax firm and ask how we can help you use the Tax Act to lower your tax debt.

CRA Taxpayer Relief Program and the Voluntary Disclosures Program

But, because the Tax Act does not specify how this discretion should be used, this broad power can itself result in unfairness or inconsistency. To facilitate this, the CRA has implemented two different programs, the Taxpayer Relief Program and the Voluntary Disclosures Program. The Taxpayer Relief Program’s focus is in allowing the CRA to apply Canada’s income tax system fairly and reasonably where extenuating circumstances that were outside the taxpayer’s control gave rise to the penalties and interest. To this effect, the CRA has listed three grounds that they consider applicable for taxpayer relief: 1) extraordinary circumstances; 2) actions of the CRA; 3) financial hardship. For example, if a taxpayer cannot file their tax return on time because a fire destroyed their home that situation may qualify for tax relief as extraordinary circumstances. Where a taxpayer files a Notice of Objection and the CRA takes 7 years to confirm or vary the assessment the facts may qualify for tax relief based on actions of the CRA.

On the other hand, the Voluntary Disclosures Program (tax amnesty or VDP) is focused on encouraging Canadian taxpayers to comply with the income tax system. Taxpayers who have accidentally or deliberately incorrectly reported income or unreported income or have failed to declare offshore assets can come forward and correct their tax affairs, and in exchange, the CRA offers to waive all or part of the penalties and interest and not to prosecute for tax evasion. If you owe a tax debt which has accrued significant penalties or interests, speak to one of our top Toronto tax lawyers to see how we can help.

In Part II of this article our top Toronto tax lawyers will cover the ten year limitation period for the CRA to waive penalties and interest as well as the case, Bozzer v. Canada (2011 FCA 186) where the Court clarified how to determine the ten year period. As readers will see, the Court considered the positions of both Bozzer and the CRA, the effect each position would have as well as considered the legislative intent in drafting section 220(3.1).

Ten Year Limitation Period for CRA to Waive Penalties and Interest – Information Circulars IC00-1R5 Voluntary Disclosures Program and IC07-1 Taxpayer Relief Provisions Updated

Ten Year Limitation Period

While the Tax Act grants the CRA discretion to waive or cancel interests and penalties, the Tax Act also specifies that there is a 10 year limitation period after which the CRA is no longer able to waive or cancel interests and penalties. What was unclear was how the 10 year limitation period was determined. Specifically, in the tax case of Bozzer v. Canada, Mr. Bozzer applied for Taxpayer Relief in 2005 regarding penalties and interests from tax debts that arose in 1989 and 1990. The CRA denied his application saying that the tax debts arose in 1989 and 1990, which was more than 10 years before the date of his application for relief. As such, the CRA claimed that they had no discretion under subsection 220(3.1) of the Tax Act to waive any of the penalties or interests that Mr. Bozzer owed stemming from those tax years. Mr. Bozzer’s position was that, although the tax debt originated more than 10 years from the date of his application, interest subsequently accrued on a yearly basis. That is to say, the CRA should have discretion to waive or cancel interest that accrued within from 1995 to 2005 in Mr. Bozzer’s case.

Ultimately, the Federal Court of Appeal agreed with Mr. Bozzer’s interpretation. Specifically, the Court noted that the text of the legislation was ambiguous and could conceivably be interpreted both ways, but the Court focused on the purpose of the legislation being essentially to promote fairness and considered a hypothetical scenario. In that scenario, a taxpayer is obligated to remit taxes for a particular year, but before preparing the tax return, the taxpayer is injured in a car accident and is in a coma for a number of years. After regaining consciousness and dealing with mental and physical rehabilitation, the taxpayer is finally able to turn his mind to filing his tax return for that before mentioned year; however, 11 years have passed by this time. By the time the taxpayer is assessed, 12 years have passed – under the CRA’s interpretation, the taxpayer would be barred from any penalty or interest relief, while under Mr. Bozzer’s interpretation, the taxpayer would be able to apply for a waiver of the interest that accrued in the 10 years preceding his application. The Court found that in such a scenario, the CRA’s interpretation would lead to a harsh result that was contrary to the purposes of section 220(3.1). The Court also looked at the wording of other sections of the Tax Act where the language of the section clearly made a forward looking effect that does not exist in section 220(3.1). The implication being that had the legislature intended that section 220(3.1) was to have a look forward effect, they knew how to draft it to make that clear, but did not.

As such, the Court has clarified that the 10 year limitation period in section 220(3.1) does not disallow the CRA from exercising their discretion to waive or cancel interest that has accrued within the preceding 10 years of an application for relief, even if the base tax debt arose more than 10 years before the application. On January 13, 2017, the CRA updated their information circulars IC00-1R5 Voluntary Disclosures Program and IC07-1 Taxpayer Relief Provisions to reflect the results of this tax case. Call our experienced Toronto tax law firm and make sure everything that can be done is being done to reduce and mitigate your tax liability.

The information is thought to be current to date of posting. Income tax law changes frequently and content may no longer reflect the current state of the law. This document is not intended to create an attorney-client relationship. You should not act or rely on any information in this document without first seeking legal advice. This material is intended for general information purposes only and does not constitute legal advice. If you have any specific questions on any legal matter, you should consult a professional legal services provider.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Contact the Author?
Click here to email the Author
In Association with
In Partnership with
Other Canada Advice Centres
Competition and Antitrust
Mergers and Acquisitions
Labour and Employment
More Advice Centers
Useful Resources
Forms available to download for income tax filing in Canada.
Hear David J. Rotfleisch discuss timely and highly topical tax matters during appearances and interviews with specialist publications.
Useful explanatory videos of income tax matters.
The following questions and answers are based on the proposed measures that were announced on December 7, 2015.
The official Government website of the CRA.
This guide is for any person who deals with the Canada Revenue Agency (CRA). The guide gives you information on the 16 rights set out in the Taxpayer Bill of Rights and explains what you can do if you believe that the CRA has not respected your rights.
The Office of the Taxpayers' Ombudsman (OTO) works to enhance the Canada Revenue Agency's (CRA) accountability in its service to, and treatment of, taxpayers and benefit recipients through independent and impartial reviews of service-related complaints and systemic issues.
Ontario personal income tax is an annual tax collected from individuals who are Ontario residents on the last day of the tax year or have income earned in Ontario for the tax year.
The following documents provide instructions for filing your 2015 income tax return.
If you earned income in B.C. or operated a Corporation with a permanent establishment in B.C. last year you need to file an income tax return. Find out when you need to file your income tax return, and if any tax credits or rebates apply to you.
Generally, a corporation must file an Alberta corporate income tax return (AT1) for each taxation year during which it has a permanent establishment in Alberta.
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.