In two recent interpretations, the CRA confirmed that it has no power to refund tax where the applicable limitation period had expired.

  1. In the first case (2014-0538901E5), a non-resident corporation (NR Co) carried on a service business in Canada and did not file tax returns within three years from the end of the taxation years in question.  Canadian tax under Part I was withheld and remitted to the CRA by the payer under Regulation 105.  The CRA later reassessed NR Co for additional tax under Part I, to which NR Co timely objected.  NR Co paid the reassessed tax to stop interest from running.  The CRA ultimately agreed with NR Co’s objection because NR Co did not have a permanent establishment in Canada under the applicable tax treaty.  However, NR Co could not obtain a refund of any tax paid under Part I because NR Co had not filed original tax returns within the 3-year limitation period required by s. 164.
  2. In the second case (2014-0542061E5), a hypothetical Canadian corporation (Canco) lent funds to its non-resident parent corporation (Parent) and paid Part XIII withholding tax (WHT) on the loan because the loan was not repaid within 2 years.  More than 2 years after the end of the calendar year in which this WHT was paid, Canco late-filed a pertinent loan or indebtedness (PLOI) election under s. 15(2.11)(d) and s. 15(2.12), and requested a refund of the WHT paid on behalf of the Parent.  On these facts, the CRA said the refund would not be available under s. 227(6) because the application for the WHT refund was not made within 2 years after the end of the calendar year in which the WHT was paid.