Legislation came into effect in 2007 which requires the Canada Revenue Agency (CRA) to withhold the payment of rebates and refunds until all required returns under the Income Tax Act, the Excise Tax Act, the Excise Act, 2001, and the Air Travellers Security Charge Act have been filed. As a result, all corporations are required to file their T2 corporate income tax returns to ensure they receive payments of refunds and rebates, including corporate entities that are exempt from paying federal income tax. However, the CRA put an administrative compliance refund hold policy in place for tax-exempt incorporated municipalities, universities, schools, hospitals, non-profit organizations, Crown corporations and Indian band councils. Under this policy, the CRA will not withhold refunds or rebates because of outstanding T2 corporate income tax returns for these entities. The CRA has applied this position to all taxation years up to and including 2010 to allow time for an internal review of the policy.
The CRA has recently indicated that its review is still underway and they expect to make an announcement on their position for tax-exempt entities in the near future. As a result, their policy will continue to apply to 2011 year-ends that end prior to the completion of their review and their expected announcement. If you have questions concerning the CRA’s policy, contact your BDO advisor.
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