The Canada Revenue Agency confirmed in a roundtable discussion
in January 2016 that professional fees related to the defence of a
Canadian taxpayer's filing positions under a CRA voluntary
disclosure application after it has been accepted are deductible
under paragraph 60(o) of the Canadian Income Tax Act, which permits
the deduction of legal or other fees related to a tax objection.
This means that if there is a dispute with the CRA about the tax
amnesty once it has been submitted, those fees incurred by the
Canadian tax lawyer or the accountant are deductible, and should
therefore be billed separately. CRA stated that for greater
certainty, professional fees are not deductible to the extent they
relate to the filing of the voluntary disclosure unless they relate
to a business, in which case they may be deductible under paragraph
20(1)(cc). The rule has always been that fees incurred to file the
CRA voluntary disclosure are generally not deductible. Accounting
fees paid to prepare the income tax returns related to the VDP
filings will generally not be deductible either. A CRA voluntary
disclosure submission is primarily a legal tax procedure that can
on occasion lead to a tax court battle, so should be submitted by a
Toronto tax lawyer. The related tax returns or T1135 forms are tax
compliance filings and should therefore be prepared by a tax
accountant and reviewed and submitted by the Canadian tax lawyer.
The voluntary disclosure process should be collaborative with both
a Canadian tax attorney and an accountant involved. The VDP
submission should not be made by an accountant and the tax returns
should not be prepared by a tax law firm. In both of those cases
the Canadian tax professional is doing work that should be handled
by the other professional and the Canadian taxpayer is not being
properly served and may not have the protection of professional
liability insurance if there is a problem.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The CRA provides new housing rebates for individuals who have purchased or built a new house or have substantially renovated a house or made a major addition to a house who plan on living in it personally or letting a relative live there.
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