The Canada Revenue Agency had an important win this week in its
efforts to access information outside of Canada. On March 20,
2013, the Federal Court issued its decision in
v. M.N.R. 2013 FC 291, dismissing Soft-Moc's judicial
review application to have the CRA's decision to issue a
Foreign-Based Information Requirement set aside or varied.
The CRA has broad powers to access information related to the
determination of a taxpayer's tax obligations. Under
subsection 231.6 of the Income Tax Act, these powers include the
issuance of a Foreign-Based Information Requirement to obtain
information or documents located outside of Canada.
In Soft-Moc, the CRA was conducting a transfer pricing audit and
sought information from corporations in the Bahamas who provided
services to Soft-Moc. These corporations and their individual
Bahamian resident shareholder owned 90% of the common shares of
Soft-Moc. The CRA issued a Foreign-Based Information
Requirement to Soft-Moc under subsection 231.6(2) of the Income Tax
The Requirement requested substantial amounts of information
related to the Bahamas Corporations including extensive details of
the services provided, customers, financial statements, costs and
profits and employee data. Soft-Moc applied for judicial
review of the decision to issue the requirement.
Primarily, Soft-Moc argued that the information requested went
well beyond that necessary to enable the CRA to complete the
transfer pricing audit and that the decision to issue the
requirement was, therefore, unreasonable. Soft-Moc
argued that a portion of the information requested was irrelevant
and that some portions were confidential or proprietary.
The Court was not sympathetic to Soft-Moc's arguments,
noting the wide-ranging statutory powers of the CRA to collect
information and the low threshold to be met in determining whether
the requested information is relevant and reasonable.
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