“Pre-ruling consultations” – Refining CRA’s pilot program

Canada Revenue Agency (CRA) is pilot-testing a new “Pre-Ruling Consultation” service to taxpayers and/or their advisers.

Canada Revenue Agency (CRA) is pilot-testing a new “Pre-Ruling Consultation” service to taxpayers and/or their advisers. The pilot process allows a person to discuss a new technical issue that is critical to a seriously proposed transaction with CRA income tax rulings professionals.

CRA’s goal is to provide direction to taxpayers about their proposed transactions before or instead of incurring the time and expense of preparing a formal ruling request. The service is provided in return for hourly fees, which should deter taxpayers from using the rulings system as a means of obtaining free tax research and advice.

As the program is still in the pilot stage, CRA has an opportunity to refine details of the program’s current design to ensure the new process meets its objectives.

For example, some people may object to the amount of information that applicants would need to disclose to take part in the program. They may believe that the inability to pursue pre-rulings on a no-names basis may discourage some taxpayers from making use of the program.

Further, it could be argued that requirements to supply other information, such as transaction details, written explanations of issues and relevant research, are similar in scope to the information required in the formal rulings process. Would general descriptions of the facts and issues be enough for CRA to develop an opinion at the pre-ruling stage? Or is it unrealistic to ask CRA to rule on a new issue without disclosing all of the relevant facts and analysis?

Apart from such details, it seems likely that the Pre-ruling Consultation process will help ensure that CRA’s responses are consistent and provide a record of responses to promote transparency.

Note: Since this blog was published, the Income Tax Rulings Directorate adopted the pre-ruling consultation as a permanent part of its advance income tax ruling service. You can find details in Information Circular IC 70-6R7, Advance Income Tax Rulings and Technical Interpretations.

Join in the conversation

Does the CRA’s Pre-ruling Consultation process meet the goal of providing an efficient and cost-effective way to help taxpayers and advisers to gain certainty over the sustainability of their tax positions? Do you agree with the pilot process as currently outlined, or are there better alternatives for providing such a service?

Post a comment below, or email Gabe Hayos.

About the Author

Gabe Hayos, FCPA, FCA, ICD.D

Vice-president, Taxation, CPA Canada