ABOUT TAX LITIGATION
When the Canada Revenue Agency disagrees with the amount of tax you reported and believes that you owe more, you have a tax dispute. Tax disputes can relate to income tax or HST. They typically start with the CRA conducting an audit or review and then issuing a notice of reassessment.
Tax disputes usually involve filing an objection with the CRA and, if necessary, appealing to the Tax Court of Canada.
At HazloLaw – Business Lawyers, we have expertise in helping individuals and corporations successfully resolve their tax disputes, obtaining the best result possible, as efficiently as possible.
If you are facing a tax dispute, contact us promptly to discuss your options.
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What Client’s Say
Dean was handed my complicated appeal as we were awaiting our court date. He spared no effort in endeavouring to master all of its details. After which he skillfully liaised with the assigned Justice solicitor, and, to my great astonishment, was able to convince her to quash all of the charges. I still don’t know if I am more astonished or thankful. Throughout what was a trying ordeal for me, Dean was unfailingly professional; a consummate communicator, and an insightful master of the tax law regime. I can’t thank him enough for his robust and polished efforts on my behalf.
The area of business law is exceedingly complex. Additionally, as businesses may span multiple jurisdictions and subject matters there are many important issues that need to be considered for your business to run smoothly. A corporate lawyer can assist with navigating the many documents and forms involved with incorporating a business, maintaining a corporation through effective minute books, and advising on proper business expansion in a legal sense if your corporation flourishes. When constructing and running a business it is important that procedure is properly followed. Having a corporate lawyer to ensure all information is effectively portrayed is the best way to safeguard your business so it does not run into any troubling issues in the future.
A minute book is a compilation of corporate records. When incorporating, minute books include many documents including the Articles of Incorporation, bylaws, initial resolutions setting out officers, forms of share certificates and more. Following preliminary corporate set up there are events that should be recorded in the minute books such as changes of the corporation’s directors and changes to share structure.
Although there is no legislation mandating a minute book per se, corporations must nonetheless organize and store corporate documents, and a minute book is a useful vehicle for doing so.
A properly kept minute book will facilitate proper functioning of the corporation, and it will be indispensable should you be audited by the Canada Revenue Agency. Corporate records are of course subject to Government review to ensure you are complying with the rules and regulations.
A non-disclosure agreement is a contract between parties wherein the parties restrict themselves from releasing confidential information regarding the other’s business operations. They arise when two businesses are contemplating doing business together. They function to protect information during discussions, proposals, reviews, and negotiations.
Directors are responsible for managing and supervising the management of the business and affairs of the corporation. Directors have a duty to act in the best interests of the corporation.
Officers are people appointed by the directors of a corporation to specific positions. These positions may include the president, treasurer, or chairman of the Board. Officers are essentially responsible for the day to day miniscule operations of the corporation. It is permissible for an individual to be a director, officer, and shareholder simultaneously, which is often the case in small business.
Shareholders make financial investments in the corporation and are thus adamant about ensuring the corporation excels in business. Shares represent an ownership interest in the company. Shareholders are responsible for ensuring the director(s) is acting in the corporation’s best interest, which in turn maximizes profitability paid to shareholders in the form of dividends. Shareholders can vote to remove the Director, or an individual on the Board of Directors, if they decide the best interest of the company is not being met. Shareholders are also responsible for approving certain decisions of the Director, such as changing the corporation’s by-laws and amending the Articles of Incorporation.
The largest advantage of incorporation is that a corporation is deemed to have its own separate legal identity. The corporation has a legal personality, existence, rights and duties that are distinct from those of the individuals comprising that group who constituted the corporation. Thus, a shareholder will not be liable to the debts and obligations of the corporation, and the corporation is not necessarily liable for the actions of the individual shareholders. Additionally, the tax burdens of the shareholders and the corporation are separate, with corporations generally being taxed at a lower rate than individuals.
A letter of credit (LoC) is a document issued by a bank (the issuing bank) at the request of its customer by which the issuing bank provides a binding undertaking to make a payment of money to a third party (the beneficiary). It is a financial contract between a bank, a bank’s customer and, typically, the client or supplier of that customer. LoCs are often used during international trade transactions to “bridge the trust gap” that is, the risks run by one party that it will not receive the goods or services it has contracted for, and by the other party that it will not get paid.
A LoC can be of the standby variety, in which case it is not meant to be drawn unless a party has defaulted, or of the irrevocable variety, in which case it is meant to be a method of payment. While a LoC is drawn up in the context of a contract for the purchase or goods or services, its strength lies in the principle of autonomy, which ensures that notwithstanding any disputes or disagreements arising from the performance of the underlying contract, the issuing bank must pay the supplier as long as the demand for payment is accompanied by the documentation that had been agreed upon when the LoC was issued. At HazloLaw – Business Lawyers, our lawyers can work with your bank to craft a LoC that will best protect your interests.
A joint venture (JV) is a cooperative relationship in which two or more business entities work together on a specific project or business activity, usually limited in duration to a specific time frame. In Canada, unlike, say, Mexico, there are no written rules governing JVs like there are for partnerships. While incorporating a new company to house the JV is not essential, it would be terribly imprudent not to have a written joint venture agreement in place to outline the purpose of the relationship, the members’ contributions (financial or operational), their obligations, the term of the agreement and its termination, and the distribution of revenues and expenses. Distinct from other commercial agreements, a JV agreement may provide for a set of operational principles and rules as opposed to fully articulated obligations, leaving the parties with greater operational freedom while keeping a baseline to which they can refer to. At HazloLaw, our business lawyers have extensive experience drafting, reviewing and negotiating joint venture and partnership agreements.
If the claim is being brought in Canada, the short answer is no. Canadian courts are very welcoming and foreign plaintiffs are essentially treated on the same footing as local ones. However, Canadian defendants can avail themselves of certain procedures in order to “attack” the jurisdiction of the Canadian court, either by demonstrating that the court does not have jurisdiction over the case or that another court, perhaps in the plaintiff’s own country, is better suited to hear it. Also, in most provinces, a motion can be brought to force the plaintiff to post security, a move which can discourage plaintiffs from pursuing their claim or stall the proceedings while settlement efforts are pursued.
On the other hand, if the claim is being brought abroad, a Canadian defendant may be somewhat more tempted to ignore it on the basis that the defendant does not have assets or business interests in the foreign jurisdiction. Yielding to such temptation may be a bad idea since a determined plaintiff will proceed with its action (all the more easily if it is undefended) and then seek enforcement of the judgment in Canada. At this stage, it can be very difficult, and sometimes impossible, to prevent this from occurring. This is why in many cases it will make sense for the Canadian party to appear before the foreign court if only to contest its jurisdiction.
While any legal dispute can be a sticky matter, this is even more so when a foreign party is involved. Determining which law can be used most advantageously in a given situation, properly serving a foreign party, conducting discovery, and ensuring that a judgment is enforceable all require the type of expert handling that HazloLaw – Business Lawyers can provide.
Martin brings to the Firm what many lawyers seldom do: a passion for helping people resolve complex or unorthodox legal issues. This thirst for exploring what many hesitate to take on, coupled with over 20 years’ experience across a wide spectrum of practice areas and industries makes Martin a lawyer that you want acting on your behalf. Should your needs be international in nature, Martin brings to the table a unique mix of linguistic abilities, training in both civil law and common law systems, a solid knowledge of international legal instruments and European law, a wide international network, foreign work experience and sensitivity to cultural differences. By bridging distinct legal systems, Martin can remove unnecessary uncertainties that are hampering your deal or complicating your personal issues.
International Lawyers are retained when there is a legal challenge or opportunity that implicates a foreign jurisdiction. Perhaps you operate a business locally and want to franchise it abroad, or perhaps you want to sign contracts with foreign distributors to sell your product internationally or even open a subsidiary in another country. On the other hand, maybe you are involved in a dispute and are being sued by a foreign party or want to bring a claim against one. In all of these situations, hiring an international lawyer means that you will be retaining an expert with knowledge of international rules and usually at least a basic understanding of foreign legal systems.
At HazloLaw – Business Lawyers, we have a wealth of experience advising foreign companies entering Canada, as well as Canadian companies expanding into foreign markets. We also have the proper understanding and experience in the handling of disputes with an international component and can help you ensure that the overall outcome of your case is an optimal one.
In tax disputes, the burden of proof is on the taxpayer. This means, that it’s you that must prove that your position is correct. The CRA does not have to prove that their reassessment is correct. This entitles CRA employees to make assumptions and, in some instances, emboldens them to behave unreasonably.
The best antidote is to retain a professional who specializes in tax disputes to defend your rights and empower you to make informed decisions. Canada’s Taxpayer Bill of Rights affords you the right to pay no more tax than what is required by law and to be treated professionally, courteously and fairly.
Unfortunately, exercising these rights often requires the assistance of a tax dispute resolution and litigation lawyer.
Reaching a settlement agreement with the CRA is often the most efficient and affordable means of resolving a tax dispute. And indeed, our experience is that about 95% of tax disputes settle before going to trial.
But negotiating a settlement in a tax dispute is very different from negotiating a settlement in normal litigation or in a typical business transaction. By law, the CRA can only agree to settlement agreements that are “principled”.
This means they can only agree to concede a particular element of a reassessment if they have been provided with an argument and supporting evidence that is legally compelling.
As a result, the CRA cannot agree to settle a dispute merely because the legal costs outweigh the amount in dispute. Likewise, they cannot agree to “split the difference” and we cannot simply “make them an offer.” Therefore, succeeding in a tax dispute requires detailed legal analysis and diligent gathering of evidence.
Understandably, this is very frustrating for individuals and corporations that find themselves in tax disputes.
If you’ve clicked on this question, the answer is probably “now”. There’s no downside to making the call. Plus, one of the keys to succeeding in a tax dispute is developing, at the outset, a winning-argument and then sticking to that argument throughout the entirety of the dispute.
Often, the most damning evidence we have to overcome is a statement made by the taxpayer (and sometimes their accountant) during the audit or objection stage.
Even if you already have an accountant working on the file, it’s still wise to have a preliminary discussion with a lawyer who specializes in tax dispute resolution and litigation. Accountants have specific knowledge and expertise that are critical to succeeding in a tax dispute.
The best results often come when an accountant and a tax lawyer work together.
We understand that legal costs are always a concern. We will provide you a clear picture of the costs you can expect to incur to succeed in your dispute.
Canadian tax law imposes strict time deadlines on taxpayers who wish to dispute a Notice of Reassessment by the CRA. If you miss one of these deadlines, you lose all rights to dispute the reassessment, which may leave you with no choice but to pay the full amount.
The day on which the CRA issues you a Notice of Reassessment starts a 90-day time deadline for you to file a Notice of Objection. If you miss that deadline, you have another 365 days to submit an Application for an Extension of Time to File a Notice of Objection. If you miss that deadline, you lose your right to dispute the tax that the CRA has reassessed you.
If you object to CRA’s reassessment within the timeline but the CRA denies your objection, you have 90-days from the date of CRA’s rejection letter (“Notice of Confirmation”) to file a Notice of Appeal with the Tax Court of Canada. If you miss that deadline, you have another 365 days to file an Application for an Extension of Time to File a Notice of Appeal.
If you miss that deadline, you lose your right to further dispute the tax that the CRA reassessed you. Tax disputes are complicated and procedural errors can cost you your rights. We recommend you call is if you are involved in a dispute.
A typical tax dispute begins with the CRA conducting an audit. If the CRA does not agree with the amount of tax that you initially reported owing, they will issue you a Notice of Reassessment.
Once the CRA has issued the Notice of Reassessment (and before the time deadline), you can file a Notice of Objection. (We recommend you call us before doing so).
The CRA will assign your objection to an Appeals Officer, who is different from the auditor. You will have an opportunity to make submissions to the Appeals Officer to convince them that the auditor got it wrong.
If the Appeals Officer does not fix the auditor’s errors. You can file a Notice of Appeal with the Tax Court of Canada.
Our experience is that, ultimately, about 95% of Notices of Appeal settle before trial, but if necessary, you can have a judge of the Tax Court make an independent ruling on your appeal.
There is hope. In 2016 the Auditor General released a report in which it found that 65% of taxpayers are fully or partially successful in objecting to a Notice of Reassessment. This does not include the taxpayers who go on to succeed after filing an appeal to the Tax Court of Canada.
We often obtain significant reductions in reassessments on behalf of our clients. Sometimes, we convince the CRA to drop the reassessment entirely.
We achieve these positive results through determination and hard work. It will take commitment and effort on your part as well.
A Notice of Reassessment (“NoR”) is very different from a Notice of Assessment (“NoA”).
When you file your tax return, the CRA will process your return and issue you a NoA, usually within two to eight weeks. The NoA typically confirms the amount of tax that you owe based on what you reported in your tax return.
But if the CRA later conducts an audit and concludes that they do not agree with your initial tax return (perhaps they believe you have unreported income or they deny your business expenses), they will issue you a NoR. The CRA can issue you a NoR years after they issued your NoA and they often add significant tax and penalties.
You have the right to object to the NoR (and taxpayers often succeed), but you have to file your objection before the time deadline. For more information, read here.
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