Best Corporate tax litigation lawyers in Canada as ranked by LexpertThe practice area of corporate tax litigation lawyers is generally understood to include disputes involving tax planning or estates/trust structures for high net worth individuals; disputes between various levels of governments as to proper tax jurisdiction or challenges to the exercise of purported tax jurisdictions; disputes involving particular types of tax such as GST, withholding, etc; disputes regarding proper taxation of commercial transactions or agreements; disputes regarding taxation of particular corporate structures, reorganizations, etc; disputes regarding particular financing transactions or financial instruments; disputes regarding taxation of particular industries such as real estate, natural resources, etc; international tax disputes with respect to matters such as transfer pricing; and other such matters.
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Under taxation laws, taxes may come in many forms – such as income tax, property tax, or sales tax, among others. This may also depend in each country, such as the rates it imposes, the manner of collection, and the due date of every kind of tax which is the most important.
As one of the many forms of tax, corporate tax is generally the tax levied on the net profits of a business, company, or corporation. Although there may be certain corporate income that are tax-exempt, corporate tax may be based on a corporation’s taxable income after deducting administrative and operational costs, along with other costs. Corporate tax litigation lawyers are especially attuned to this legislation.
Corporate income tax is regulated by the Canadian Revenue Agency (CRA), the federal agency tasked with tax collection and enforcement of Canadian tax laws. For corporate tax, the governing law would be the Income Tax Act. The application of the Act and its tax rates are best explained by a corporate tax litigation lawyer, but a short overview is provided below.
According to the Act, all Canadian resident corporations, including non-profit, tax-exempt, and inactive organisations, must file their corporate income tax return every tax year. This also applies even though, based on their computation, a corporation does not have payable income tax. The only exempted corporations are specific Crown corporations, Hutterite colonies, and registered charity organisations. Although income tax returns may be filed either personally before the CRA or online, corporations are required to file it online if their annual gross income exceeds $1 million.
The federal rates of corporate income tax is generally 38%, which is reduced to 28% should the federal tax abatement apply, or 15% after general tax reduction. However, if the corporation avails of the small business deduction (SBD), the net tax rate would now be at 9%.
As for the provincial or territorial income tax rates, corporations may be levied either the lower rate or the higher rate – the former applies to SBDs and the latter applies to all other businesses. You can speak with a corporate tax litigation lawyer for more help with this.
Generally, corporate income taxes are paid by and is the responsibility of corporations. It is separate from the shareholders’ personal income taxes and other taxes. An exception of this rule is the principle of Directors’ Liability, where there are certain circumstances that a director or a shareholder will be held liable for any tax debts that the corporation has incurred.
First is when the corporation did not remit the Goods and Services Tax (GST) and/or the Harmonized Sales Tax (HST) it has collected on the sale of its products or services. Here, it will be accounted by the CRA upon the shareholders or the directors. Second is when the corporation did not remit the employee source deductions to the CRA. Some examples of these employee source deductions are Canada Pension Plan contributions; employment insurance premiums; federal income taxes; and provincial and territorial income taxes.
The reason behind the Directors’ Liability principle is that the shareholders or directors are the ultimate persons responsible for checking that the corporation complies in good faith with the tax liabilities imposed by the government upon it. As the top executives of the corporation, they must regularly update with the corporate officers on any tax liability of the corporation.
However, the said principle is not absolute. An exception to the principle is that the action against shareholders or directors prescribes after two years. After said period, the CRA may not hold the shareholders or the directors for these tax liabilities anymore. Another exception is when it can be shown by the shareholders or directors by convincing evidence that they have complied with the GST/HST and employee source deductions remittances. When actions are taken against said shareholders, directors, or corporation commences, corporate tax litigation lawyers may assist clients in establishing such compliance to extinguish their liability.
A tax dispute arising out of a tax assessment or determination is best handled by the professionals – one of whom are the corporate tax litigation lawyers. In resolving tax disputes, they would have to be in close coordination with the CRA for all matters which may still be addressed by negotiating and presenting the case before the Agency, before proceeding to litigation.
Most common examples of tax disputes are:
It is also worthy to note that not all tax assessments or determinations may be objected before the CRA, hence there is a need to check with a corporate tax litigation lawyer if such tax dispute may be raised before the CRA or not.
For corporations, tax objections or tax disputes before the CRA must be filed within 90 days (which is different for personal taxes). However, time extensions may be granted if the cause of the delay was a prior dispute still before the CRA. If the request for extension was denied by the Agency, it may be appealed to the Tax Court of Canada within 90 days after the receipt of the CRA’s decision. Since these periods are jurisdictional and mandatory, coordination with a corporate tax litigation lawyer would be of great help when filing tax disputes occur.
Any unfavourable decision of the CRA on a corporate tax dispute may be appealed to the Tax Court of Canada. Said appeal must be filed 90 days after receipt of the decision of the CRA that is being appealed.
After the Tax Court of Canda, any adverse decision of the said Tax Court may be appealed to the Federal Court of Appeal, which must be filed after 30 days of the receipt of the Tax Court’s decision.
The court of last resort for the corporate tax disputes would be the Supreme Court of Canada, where decisions of the Federal Court of Appeal may be appealed to. However, the Supreme Court’s permission (or leave of court) is needed by filing an application within 60 days from the receipt of the Federal Court of Appeal’s decision.
When cases are brought to the courts of higher jurisdictions, corporate tax litigation lawyers can provide additional guidance to appellants as tax battles may have a lengthier and difficult process at these late stages of tax disputes.
Want to learn more about corporate taxes? Talk with any of the best corporate tax litigation lawyers by heading down below to see our Lexpert Ranked lawyers.