Should the taxpayer decide to challenge the CRA's reassessment, it can do so within 90 days from the date of issuance of the Notice of Reassessment (NORA) by filing Form T400A, commonly referred to as a Notice of Objection (NOO). This one-page form must be filed with the CRA's Chief of Appeals, with documents attached providing a detailed representation of the facts and the taxpayer's reasons for objection. Filing a NOO has certain advantages. For large corporations, filing the NOO requires the payment of 50% of the tax owing, keeping the CRA from collecting the entire tax owed while awaiting action on the NOO. For all taxpayers, the NOO will keep the appeals process open while initiating action to obtain relief from double taxation under one of Canada's Tax Treaties with the other country.
It should also be noted that for transfer pricing-related reassessments where the upward adjustment to income is greater than the lesser of 10% of the taxpayer's declared annual revenue in the year of the reassessment or $5 million, a transfer pricing penalty equal to 10% of the adjustment could be levied by the CRA. Once the penalty threshold is met, a reassessment is automatically referred to the CRA's Transfer Pricing Review Committee (TPRC) for review to determine whether a penalty is warranted. Typically, the TPRC examines whether the documentation met the reasonable efforts standard in deciding whether to impose the transfer pricing penalty. Transfer pricing penalties are immediately payable when imposed by the TPRC, are not tax deductible, and are not subject to relief in the Competent Authority process. Thus, the NOO would also request the removal of the transfer pricing penalty.