Legislative changes

Legislative changes were introduced in 2006 and have been in effect since April 1, 2007. The objective of these changes is to simplify tax compliance for businesses by harmonizing various accounting, penalty and interest provisions of the federal acts administered by the Canada Revenue Agency (CRA), such as the Excise Tax Act (ETA), the Income Tax Act (ITA), the Excise Act, 2001, and the Air Travellers Security Charge Act (ATSCA).

Key changes for businesses include:

New failure to file penalty: A penalty is charged if your GST/HST return is filed late. This penalty is equal to 1% of the amount unpaid or outstanding for the reporting period as of the return due date, plus 0.25% of the overdue amount times the number of complete months the return was overdue, to a maximum of 12 months. Note that if you file your GST/HST return late, together with a refund or rebate claim, we will still assess a failure to file penalty on the amount owing on the late-filed GST/HST return.

Refund hold: If you are expecting a refund after filing your GST/HST return or a rebate application, you will receive the refund or rebate amount only if you have filed all of the returns for all of your applicable business program accounts required under the ETA, the ITA, the Excise Act, 2001, and the ATSCA.

Offset of refunds: If you are expecting a refund after filing your GST/HST return or a rebate application and you owe amounts under the ETA, the ITA, the Excise Act, 2001, or the ATSCA, the refund or rebate will automatically be used to offset the other debt.

Calculation of interest: The prescribed interest rate paid on a refund of net tax or on a rebate of GST/HST is the basic rate, plus 2%. The prescribed interest rate charged on an overdue amount is the basic rate, plus 4%. The basic rate is based on the rate charged on 90-day Treasury Bills, adjusted quarterly, and rounded up to the nearest whole percentage (expressed as a percentage per year). This replaces the 6% late remitting penalty.

Date interest begins: Interest on a refund of net tax and overpayment is paid beginning 30 days after the later of:

• the day the return is filed; and
• the day after the end of your reporting period.

In the case of rebates, interest is paid beginning on the day that is 30 days after the application in which the rebate claim is filed and ending on the day the rebate is paid.

To learn more about legislative changes, see GST/HST Notice 212, July 2006 and the GST/HST Info Sheet GI-024, Harmonizing the Administrative Provisions Respecting Standardized Accounting.

For more information, visit our Questions and answers - New legislation for business.