Appealing a Corporate Tax Audit
When a corporation undergoes a Canada Revenue Agency (the “CRA”) audit, the outcome may result in reassessments, penalties, or additional taxes owing. Businesses are not required to accept these results without question. Canadian law provides corporations with the right to appeal a corporate tax audit through a structured process. Understanding this process is crucial for protecting your business and ensuring that tax assessments are accurate and fair.
When to Consider an Appeal
An appeal may be warranted if the corporation believes the CRA auditor made an error in fact or law. Common reasons for appealing include:
- The CRA misinterpreted your financial records or supporting documents
- Legitimate business expenses were denied
- Income was incorrectly reassessed or overstated
- Penalties were applied unfairly
- The auditor misapplied provisions of the applicable legislation.
The Corporate Tax Audit Appeal Process
Step 1: Notice of Objection
The first step in appealing a corporate tax audit is filing a Notice of Objection. This must be submitted to the CRA within 90 days of receiving the reassessment notice. The Notice of Objection is a formal written statement outlining why you disagree with the reassessment and providing supporting evidence. Missing this deadline may severely limit your options.
Step 2: Review by the CRA Appeals Division
Once the Notice of Objection is filed, the case is transferred to the CRA’s Appeals Division. This division is independent of the original audit team, offering a fresh review of the facts and law. The Appeals Officer may request additional documents, conduct interviews, or provide opportunities to present legal arguments. This stage can take anywhere from several months to more than a year, depending on the complexity of the case.
Step 3: Resolution or Confirmation
The Appeals Division may decide to vary, vacate, or confirm the reassessment. If your corporation provides strong supporting evidence, the Appeals Officer may reduce or eliminate additional taxes or penalties. However, if the reassessment is confirmed and you still disagree, further steps are available.
Step 4: Tax Court of Canada
If the CRA Appeals Division upholds the reassessment, corporations can escalate the matter by filing an appeal with the Tax Court of Canada. The Tax Court is an independent judicial body that hears evidence, reviews arguments, and makes binding decisions. This stage is more formal and typically requires legal representation.
Step 5: Federal Court of Appeal and Beyond
In rare cases, if a corporation disagrees with the Tax Court’s ruling, it may pursue further appeals to the Federal Court of Appeal and, in limited circumstances, to the Supreme Court of Canada. These higher levels of appeal are generally reserved for significant legal issues rather than factual disputes.
Timelines for Appealing a Corporate Tax Audit
- Notice of Objection: Must be filed within 90 days of the reassessment
- CRA Appeals Division Review: Often takes 6 to 18 months, depending on complexity
- Notice of Appeal: Must be filed within 90 days from the date of the decision made by CRA Appeals
- Tax Court of Canada: Cases can take 1 to 2 years or more to resolve
Given these timelines, prompt action is essential to protect your business’s rights.
Benefits of Professional Representation
Appealing a corporate tax audit involves complex legal and procedural requirements. A tax lawyer can:
- Assess whether an appeal is likely to succeed
- Draft persuasive Notices of Objection
- Communicate with the CRA Appeals Division on your behalf
- Represent your corporation in Tax Court if necessary
Engaging professional representation can improve your chances of a favourable outcome and reduce the stress of navigating the process alone.
How to Improve Your Appeal Strategy
Corporations can strengthen their appeal by:
- Maintaining complete and accurate records year-round
- Submitting clear and organized supporting evidence
- Avoiding emotional or speculative arguments
- Ensuring all deadlines are met without exception
- Seeking legal advice before filing objections or appeals
Schedule a Free Consultation
If your corporation is facing an unfavourable CRA reassessment, you do not have to accept the results without challenge. Schedule a free consultation with Rosen & Associates Tax Law to discuss your options for appealing a corporate tax audit and protecting your business.
Disclaimer: This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions, you should consult a lawyer.
Bhavika Chadha