Income Tax Act (R.S.C., 1985, c. 1 (5th Supp.))

Marginal note:Penalty for late or deficient instalments

163.1 Every person who fails to pay all or any part of an instalment of tax for a taxation year on or before the day on or before which the instalment is required by this Part to be paid is liable to a penalty equal to 50% of the amount, if any, by which

• (a) the interest payable by the person under section 161 in respect of all instalments for the year

exceeds the greater of

• (b) $1,000, and

• (c) 25% of the interest that would have been payable by the person under section 161 in respect of all instalments for the year if no instalment had been made for that year.

Misrepresentation of a Tax Matter by a Third Party

Marginal note:Definitions

• 163.2 (1) The definitions in this subsection apply in this section.

  culpable conduct

  culpable conduct means conduct, whether an act or a failure to act, that

  • (a) is tantamount to intentional conduct;

  • (b) shows an indifference as to whether this Act is complied with; or

  • (c) shows a wilful, reckless or wanton disregard of the law. (conduite coupable)

  entity

  entity includes an association, a corporation, a fund, a joint venture, an organization, a partnership, a syndicate and a trust. (entité)

  excluded activity

  excluded activity, in respect of a false statement, means the activity of

  • (a) promoting or selling (whether as principal or agent or directly or indirectly) an arrangement, an entity, a plan, a property or a scheme (in this definition referred to as the “arrangement”) where it can reasonably be considered that

    • (i) subsection 66(12.68) applies to the arrangement,

    • (ii) the definition tax shelter in subsection 237.1(1) applies to a person’s interest in the arrangement, or

    • (iii) one of the main purposes for a person’s participation in the arrangement is to obtain a tax benefit; or

  • (b) accepting (whether as principal or agent or directly or indirectly) consideration in respect of the promotion or sale of an arrangement. (activité exclue)

  false statement

  false statement includes a statement that is misleading because of an omission from the statement. (faux énoncé)

  gross compensation

  gross compensation of a particular person at any time, in respect of a false statement that could be used by or on behalf of another person, means all amounts to which the particular person, or any person not dealing at arm’s length with the particular person, is entitled, either before or after that time and either absolutely or contingently, to receive or obtain in respect of the statement. (rétribution brute)

  gross entitlements

  gross entitlements of a person at any time, in respect of a planning activity or a valuation activity of the person, means all amounts to which the person, or another person not dealing at arm’s length with the person, is entitled, either before or after that time and either absolutely or contingently, to receive or obtain in respect of the activity. (droits à paiement)

  participate

  participate includes

  • (a) to cause a subordinate to act or to omit information; and

  • (b) to know of, and to not make a reasonable attempt to prevent, the participation by a subordinate in an act or an omission of information. (participer)

  person

  person includes a partnership. (personne)

  planning activity

  planning activity includes

  • (a) organizing or creating, or assisting in the organization or creation of, an arrangement, an entity, a plan or a scheme; and

  • (b) participating, directly or indirectly, in the selling of an interest in, or the promotion of, an arrangement, an entity, a plan, a property or a scheme. (activité de planification)

  subordinate

  subordinate, in respect of a particular person, includes any other person over whose activities the particular person has direction, supervision or control whether or not the other person is an employee of the particular person or of another person, except that, if the particular person is a member of a partnership, the other person is not a subordinate of the particular person solely because the particular person is a member of the partnership. (subalterne)

  tax benefit

  tax benefit means a reduction, avoidance or deferral of tax or other amount payable under this Act or an increase in a refund of tax or other amount under this Act. (avantage fiscal)

  valuation activity

  valuation activity of a person means anything done by the person in determining the value of a property or a service. (activité d’évaluation)

• Marginal note:Penalty for misrepresentations in tax planning arrangements

  (2) Every person who makes or furnishes, participates in the making of or causes another person to make or furnish a statement that the person knows, or would reasonably be expected to know but for circumstances amounting to culpable conduct, is a false statement that could be used by another person (in subsections (6) and (15) referred to as the “other person”) for a purpose of this Act is liable to a penalty in respect of the false statement.

• Marginal note:Amount of penalty

  (3) The penalty to which a person is liable under subsection (2) in respect of a false statement is

  • (a) where the statement is made in the course of a planning activity or a valuation activity, the greater of $1,000 and the total of the person’s gross entitlements, at the time at which the notice of assessment of the penalty is sent to the person, in respect of the planning activity and the valuation activity; and

  • (b) in any other case, $1,000.

• Marginal note:Penalty for participating in a misrepresentation

  (4) Every person who makes, or participates in, assents to or acquiesces in the making of, a statement to, or by or on behalf of, another person (in this subsection, subsections (5) and (6), paragraph (12)(c) and subsection (15) referred to as the “other person”) that the person knows, or would reasonably be expected to know but for circumstances amounting to culpable conduct, is a false statement that could be used by or on behalf of the other person for a purpose of this Act is liable to a penalty in respect of the false statement.

• Marginal note:Amount of penalty

  (5) The penalty to which a person is liable under subsection (4) in respect of a false statement is the greater of

  • (a) $1,000, and

  • (b) the lesser of

    • (i) the penalty to which the other person would be liable under subsection 163(2) if the other person made the statement in a return filed for the purposes of this Act and knew that the statement was false, and

    • (ii) the total of $100,000 and the person’s gross compensation, at the time at which the notice of assessment of the penalty is sent to the person, in respect of the false statement that could be used by or on behalf of the other person.

• Marginal note:Reliance in good faith

  (6) For the purposes of subsections (2) and (4), a person (in this subsection and in subsection (7) referred to as the “advisor”) who acts on behalf of the other person is not considered to have acted in circumstances amounting to culpable conduct in respect of the false statement referred to in subsection (2) or (4) solely because the advisor relied, in good faith, on information provided to the advisor by or on behalf of the other person or, because of such reliance, failed to verify, investigate or correct the information.

• Marginal note:Non-application of subsection (6)

  (7) Subsection (6) does not apply in respect of a statement that an advisor makes (or participates in, assents to or acquiesces in the making of) in the course of an excluded activity.

• Marginal note:False statements in respect of a particular arrangement

  (8) For the purpose of applying this section (other than subsections (4) and (5)),

  • (a) where a person makes or furnishes, participates in the making of or causes another person to make or furnish two or more false statements, the false statements are deemed to be one false statement if the statements are made or furnished in the course of

    • (i) one or more planning activities that are in respect of a particular arrangement, entity, plan, property or scheme, or

    • (ii) a valuation activity that is in respect of a particular property or service; and

  • (b) for greater certainty, a particular arrangement, entity, plan, property or scheme includes an arrangement, an entity, a plan, a property or a scheme in respect of which

    • (i) an interest is required to have, or has, an identification number issued under section 237.1 that is the same number as the number that applies to each other interest in the property,

    • (ii) a selling instrument in respect of flow-through shares is required to be filed with the Minister because of subsection 66(12.68), or

    • (iii) one of the main purposes for a person’s participation in the arrangement, entity, plan or scheme, or a person’s acquisition of the property, is to obtain a tax benefit.

• Marginal note:Clerical services

  (9) For the purposes of this section, a person is not considered to have made or furnished, or participated in, assented to or acquiesced in the making of, a false statement solely because the person provided clerical services (other than bookkeeping services) or secretarial services with respect to the statement.

• Marginal note:Valuations

  (10) Notwithstanding subsections (6) and 163(3), a statement as to the value of a property or a service (which value is in this subsection referred to as the “stated value”), made by the person who opined on the stated value or by a person in the course of an excluded activity is deemed to be a statement that the person would reasonably be expected to know, but for circumstances amounting to culpable conduct, is a false statement if the stated value is

  • (a) less than the product obtained when the prescribed percentage for the property or service is multiplied by the fair market value of the property or service; or

  • (b) greater than the product obtained when the prescribed percentage for the property or service is multiplied by the fair market value of the property or service.

• Marginal note:Exception

  (11) Subsection (10) does not apply to a person in respect of a statement as to the value of a property or a service if the person establishes that the stated value was reasonable in the circumstances and that the statement was made in good faith and, where applicable, was not based on one or more assumptions that the person knew or would reasonably be expected to know, but for circumstances amounting to culpable conduct, were unreasonable or misleading in the circumstances.

• Marginal note:Special rules

  (12) For the purpose of applying this section,

  • (a) where a person is assessed a penalty that is referred to in subsection (2) the amount of which is based on the person’s gross entitlements at any time in respect of a planning activity or a valuation activity and another assessment of the penalty is made at a later time,

    • (i) if the person’s gross entitlements in respect of the activity are greater at that later time, the assessment of the penalty made at that later time is deemed to be an assessment of a separate penalty, and

    • (ii) in any other case, the notice of assessment of the penalty sent before that later time is deemed not to have been sent;

  • (b) a person’s gross entitlements at any time in respect of a planning activity or a valuation activity, in the course of which the person makes or furnishes, participates in the making of or causes another person to make or furnish a false statement, shall exclude the total of all amounts each of which is the amount of a penalty (other than a penalty the assessment of which is void because of subsection (13)) determined under paragraph (3)(a) in respect of the false statement for which notice of the assessment was sent to the person before that time; and

  • (c) where a person is assessed a penalty that is referred to in subsection (4), the person’s gross compensation at any time in respect of the false statement that could be used by or on behalf of the other person shall exclude the total of all amounts each of which is the amount of a penalty (other than a penalty the assessment of which is void because of subsection (13)) determined under subsection (5) to the extent that the false statement was used by or on behalf of that other person and for which notice of the assessment was sent to the person before that time.

• Marginal note:Assessment void

  (13) For the purposes of this Act, if an assessment of a penalty that is referred to in subsection (2) or (4) is vacated, the assessment is deemed to be void.

• Marginal note:Maximum penalty

  (14) A person who is liable at any time to a penalty under both subsections (2) and (4) in respect of the same false statement is liable to pay a penalty that is not more than the greater of

  • (a) the total amount of the penalties to which the person is liable at that time under subsection (2) in respect of the statement, and

  • (b) the total amount of the penalties to which the person is liable at that time under subsection (4) in respect of the statement.

• Marginal note:Employees

  (15) Where an employee (other than a specified employee or an employee engaged in an excluded activity) is employed by the other person referred to in subsections (2) and (4),

  • (a) subsections (2) to (5) do not apply to the employee to the extent that the false statement could be used by or on behalf of the other person for a purpose of this Act; and

  • (b) the conduct of the employee is deemed to be that of the other person for the purposes of applying subsection 163(2) to the other person.

Marginal note:Definitions

• 163.3 (1) The following definitions apply in this section.

  electronic cash register

  electronic cash register means a device that keeps a register or supporting documents through the means of an electronic device or computer system designed to record transaction data or any other electronic point-of-sale system. (caisse enregistreuse électronique)

  electronic suppression of sales device

  electronic suppression of sales device means

  • (a) a software program that falsifies the records of electronic cash registers, including transaction data and transaction reports; or

  • (b) a hidden programming option, whether preinstalled or installed at a later time, embedded in the operating system of an electronic cash register or hardwired into the electronic cash register that

    • (i) may be used to create a virtual second till, or

    • (ii) may eliminate or manipulate transaction records, which may or may not be preserved in digital formats, in order to represent the actual or manipulated record of transactions in the electronic cash register. (appareil de suppression électronique des ventes)

  service

  service has the same meaning as in subsection 123(1) of the Excise Tax Act. (service)

• Marginal note:Penalty  —  use

  (2) Every person that uses, or that knowingly, or under circumstances attributable to neglect, carelessness or wilful default, participates in, assents to or acquiesces in the use of, an electronic suppression of sales device or a similar device or software in relation to records that are required to be kept by any person under section 230 is liable to a penalty of

  • (a) unless paragraph (b) applies, $5,000; or

  • (b) $50,000 if the action of the person occurs after the Minister has assessed a penalty payable by the person under this section or section 285.01 of the Excise Tax Act.

• Marginal note:Penalty  — possession

  (3) Every person that acquires or possesses an electronic suppression of sales device or a right in respect of an electronic suppression of sales device that is, or is intended to be, capable of being used in relation to records that are required to be kept by any person under section 230 is liable to a penalty of

  • (a) unless paragraph (b) applies, $5,000; or

  • (b) $50,000 if the action of the person occurs after the Minister has assessed a penalty payable by the person under this section or section 285.01 of the Excise Tax Act.

• Marginal note:Penalty  — manufacturing or making available

  (4) Every person that designs, develops, manufactures, possesses for sale, offers for sale, sells, transfers or otherwise makes available to another person, or that supplies installation, upgrade or maintenance services for, an electronic suppression of sales device that is, or is intended to be, capable of being used in relation to records that are required to be kept by any person under section 230 is liable to a penalty of

  • (a) unless paragraph (b) or (c) applies, $10,000;

  • (b) unless paragraph (c) applies, $50,000 if the action of the person occurs after the Minister has assessed a penalty payable by the person under subsection (2) or (3) or subsection 285.01(2) or (3) of the Excise Tax Act; or

  • (c) $100,000 if the action of the person occurs after the Minister has assessed a penalty payable by the person under this subsection or subsection 285.01(4) of the Excise Tax Act.

• Marginal note:Assessment

  (5) The Minister may at any time assess a taxpayer in respect of any penalty payable by a person under subsections (2) to (4), and the provisions of this Division apply, with any modifications that the circumstances require, in respect of an assessment made under subsections (2) to (4) as though it had been made under section 152.

• Marginal note:Limitation

  (6) Despite section 152, if at any time the Minister assesses a penalty payable by a person under subsections (2) to (4), the Minister is not to assess, at or after that time, another penalty payable by the person under subsections (2) to (4) that is in respect of an action of the person that occurred before that time.

• Marginal note:Certain defences not available

  (7) Except as otherwise provided in subsection (8), a person does not have a defence in relation to a penalty assessed under subsections (2) to (4) by reason that the person exercised due diligence to prevent the action from occurring.

• Marginal note:Due diligence

  (8) A person is not liable for a penalty under subsection (3) or (4) in respect of an action of the person if the person exercised the degree of care, diligence and skill that a reasonably prudent person would have exercised in comparable circumstances to prevent the action from occurring.

• Marginal note:Assessment vacated

  (9) For the purposes of subsections (2) to (8), if an assessment of a penalty under subsections (2) to (4) is vacated, the penalty is deemed to have never been assessed.