10 November 2011 External T.I. 2011-0420611E5 - Refund Interest on Part XIII Tax

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: Whether refund interest is applicable and owing in respect of the amount held on account of the Part XIII taxes that was in controversy.

Position: Yes.

Reasons: See below.

XXXXXXXXXX

					2011-042061
					Richard Aronoff
					613-941-7239
Attention: XXXXXXXXXX 

November 10, 2011

Dear XXXXXXXXXX :

Re: Refund Interest on Funds Held as Security on a Successful Appeal of Part XIII Tax

This is in reply to your email of September 12, 2011 concerning the application of subsection 164(3) of the Income Tax Act (the "Act") to the repayment of an amount that was paid on account pending the appeal of an assessment of Part XIII tax.

The fact situation is that a taxpayer was assessed pursuant to paragraph 227(10.1)(c) for both Part I and Part XIII taxes. The taxpayer disagreed and objected to the assessments under subsection 165(1). Funds were paid pending the results of the appeal, representing the amount in controversy, as required by paragraph 225.1(6)(b). The notice of objection was successful. The amount paid on account of the Part I and Part XIII taxes was refunded, together with interest on the Part I amount only. No interest was refunded on the amount held on account of the Part XIII taxes.

At issue is the question of whether refund interest is applicable and owing in respect of the amount held on account of the Part XIII taxes that was in controversy.

Subsection 164(3) governs the entitlement to refund interest. It provides that the Minister shall pay or apply interest on the amount held at the prescribed rate for the period beginning on the day that is the latest of the days referred to in paragraphs (a) to (e) and ending on the day on which the amount is refunded.

Paragraph 227(10.1)(c) provides that the Minister may at any time assess any amount payable under Part XIII by any non-resident person. Where the Minister sends a notice of assessment to the person, subsection 227(10.1) provides, in part, that sections 150 to 163 apply with such modifications as the circumstances require. These listed provisions fall under Division I of Part I which provide the rules governing the issuance of assessments, objections to assessments, refunds and refund interest. Consequently, subsection 164(3) dealing with refund interest would apply to an assessment for Part XIII taxes under paragraph 227(10.1)(c), with such modifications as the circumstances require. This includes potential interest on amounts in controversy, as provided in paragraph 163(3)(e), to the extent that this subsection, in its entirety, permits.

While we are not aware of the particular circumstances of the taxpayer's case, in order to request refund interest on the amount that was paid on account of Part XIII taxes which was subsequently refunded, we suggest that the taxpayer contact the Compliance and Non-Resident Withholding Division of the International Tax Services Office in Ottawa. Their fax number is (613) 941-6905.

Should you have any queries or require additional information in regard to this matter, please do not hesitate to contact Richard Aronoff at the telephone number provided at the outset of this letter.

Yours truly,

B.J. Skulski
Manager
Insolvency and Administrative Law Section
Income Tax Rulings Directorate