Key Takeaways
- The CRA denied export rebate claims and issued an approximately $1.2 million assessment, plus interest.
- DMA identified errors in the original filings, prepared 12 amended fuel charge returns, and rebuilt the supporting documentation.
- DMA managed the objection and worked directly with the CRA Appeals Officer to substantiate the claims.
- The CRA accepted all 12 amended returns, eliminating the assessment and related interest, resulting in a $0 balance owing.
Client
Our client is a Canadian subsidiary of a U.S. company with operations involving the purchase and export of fuel. As part of its business activities, the company purchases fuel in Canada for export to the United States and files Canadian fuel charge returns, including rebate claims related to qualifying fuel exports.
Challenge
The client was audited by the Canada Revenue Agency (CRA) on its fuel charge filings for a 12-month period. The company had claimed rebates for fuel purchased in Canada and subsequently exported to the United States.
During the audit, the external provider that had prepared the original returns failed to submit documentation requested by the CRA or respond to follow-up inquiries. As a result, the CRA denied the rebate claims and issued an assessment of approximately $1.2 million, plus interest. The client engaged DMA to challenge the assessment and substantiate its export claims.
Solution
DMA immediately filed an objection and worked with the client to gather the documentation required to support the underlying export transactions. During its review, DMA also identified errors in how the original fuel charge returns had been prepared. To correct the filings and support the client’s position, DMA:
- Prepared and filed 12 amended fuel charge returns
- Collected and organized supporting documentation for each export transaction
- Worked directly with the CRA Appeals Officer to substantiate the rebate claims
- Met with the CRA on-site to address questions and provide additional support
- Defended the client’s position throughout the appeals process
DMA continued to manage the matter through the CRA’s processing and appeals review, a process that took approximately 18 months.
Result
The CRA accepted all 12 amended returns and supporting documentation, eliminating the assessment and related interest charges. The matter was fully resolved with a $0 balance owing, eliminating an approximately $1.2 million assessment and associated interest.
Why DMA?
When a tax audit escalates into a significant assessment, resolving the issue can require more than responding to the auditor. It requires understanding the underlying tax treatment, identifying weaknesses or errors in prior filings, developing the documentation needed to support the taxpayer’s position, and effectively managing the matter through objection and appeals.
DMA combines Canadian indirect tax expertise with hands-on audit and controversy experience to help clients address these issues from both a technical and practical perspective. In this case, that meant going beyond defending the existing filings—DMA identified and corrected the underlying return errors, rebuilt the support for the client’s rebate claims, and worked directly with the CRA through resolution.
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