There are two primary avenues available for disputing an assessment or reassessment in Canada, depending on the nature of the issue in dispute, each with its own deadlines.
For the domestic appeals process, the deadline for filing a notice of objection is 90 days from the date of assessment or reassessment.
For transfer pricing matters, in addition to (or in some cases, instead of) the domestic appeals option, taxpayers may also pursue competent authority assistance pursuant to the Mutual Agreement Procedure provisions of the applicable treaty. Deadlines vary by treaty. Under the treaty with the US, notification must be provided within six years of the taxable year end in question with no specific deadline for filing the actual competent authority request. Most of Canada's other treaties have limitation periods that typically prohibit reassessing action after five or six years from the taxable year end and require the request to be filed within two or three years of such action.
For transfer pricing matters where taxpayers intend to pursue assistance through a Mutual Agreement Procedure under one of Canada's treaties, taxpayers may file both a notice of objection and a request for competent authority assistance but one (typically the appeal) must be held in abeyance while the other process is pursued. Taxpayers cannot pursue both simultaneously.
In some circumstances, a taxpayer may end up reaching a settlement at the audit stage and, as part of that settlement, the taxpayer will be required to waive its right to file a notice of objection. In such a case, the taxpayer may still request competent authority assistance pursuant to the MAP procedure in one of Canada's treaties.
For domestic appeals, given current workloads, it can take nine months for an appeals officer to be assigned in a moderately complex matter and longer for highly complex issues. Processing the appeal is a function of the complexity of the case. Cases are resolved, on average, in one-two years, but can take much longer if the case is particularly difficult. Taxpayers also have the option of filing a notice of appeal and proceeding directly to Tax Court if an appeals officer is not assigned in a timely manner (typically considered to be 90 days). Alternatively, taxpayers can wait for the conclusion of the administrative appeals process and, if the decision by appeals is unacceptable to the taxpayer, the taxpayer can then file a notice of appeal and proceed to Tax Court. Litigation through the courts (including appeals to the federal court of appeal and the Supreme Court of Canada) can take 10+ years.
For transfer pricing matters where assistance pursuant to a Mutual Agreement Procedure process in a treaty is pursued, cases typically take approximately 24 months to resolve.
a. Start: For notices of objection, these must be filed within 90 days (or later if the CRA grants an extension of time for filing). For MAP filings, the deadline is specified in the relevant treaty. In the Canada-US context, taxpayers must file a notification with the other state within six years from the taxation year end in question and, as long as the notification is kept live, there is no fixed deadline for filing the full MAP request. For most other treaties, the deadline for filing a MAP request is two-three years from the date of the action by one of the states giving rise to the need for assistance, subject to the limitation period in the treaty for taking such action.
b. Conduct of the proceedings: For appeals, once an officer is appointed, each case will unfold on its own timeline based on the need to provide additional information or the nature and number of meetings or other consultations with the appeals officer.
For MAP cases, the appeals process would be held in abeyance while the MAP case proceeds. If the appeal covers multiple issues, some subject to a MAP request and others that are not, the issues can typically be bifurcated and the issues not subject to MAP can proceed at appeals while the other issues are held in abeyance while the MAP process unfolds.
c. Completion of proceedings: For appeals, once a decision is reached, reassessments will be issued to implement the decision. If the taxpayer disagrees, a notice of appeal may be filed with the Tax Court to pursue remedies through litigation. At the conclusion of the litigation process, final reassessments will be issued.
For MAP cases, once the competent authorities reach a conclusion, it will be implemented through new reassessments. For taxpayers to accept a MAP resolution, they must sign a waiver of their right to object so the MAP decision will be final. If taxpayers disagree with the MAP resolution, they may reject the decision and pursue the domestic appeals route by reactivating the objection being held in abeyance, assuming that the taxpayer filed an objection.
d. Other actions: An increasing number of treaties contain arbitration provisions so if a MAP resolution is not reached within the specified time frame, treaty cases could be submitted to arbitration.