Canadian companies facing a GST/HST audit by the Canada Revenue Agency (CRA) often don’t realize just how high the stakes are—until they receive a proposed assessment. By then, the clock is already ticking, and decisions made in the next 30 days can determine whether the issue is resolved efficiently or spirals into costly collections, appeals, or litigation.
At DMA, we’ve seen firsthand how CRA audits can result in inflated proposed assessments that don’t reflect a company’s actual tax liability. Fortunately, with the right expertise applied at the right time, those assessments can often be substantially reduced—or eliminated altogether.
Why the Proposed Assessment Stage Matters
When CRA issues a proposed assessment, companies typically have 30 days to respond. This short window is the best—and often only—opportunity to influence the outcome of the audit. After this point:
- The file may be transferred to collections, where immediate payment can be enforced
- If the case moves to appeals, companies are often required to pay the disputed amount upfront
- The process becomes longer, more expensive, and less collaborative once the audit team hands off the file
In many cases, businesses have legitimate reasons to dispute the proposed assessment—but they don’t have the expertise or resources to challenge it effectively in such a short timeframe.
The Disconnect Between Taxpayers and Auditors
One common theme we see in CRA audits is a disconnect between how a business operates and how the CRA interprets the transactions. Auditors may misunderstand a company’s supply chain, misapply legislation, or lack the documentation needed to support a taxpayer’s position. And while the taxpayer might be confident that the assessment is wrong, simply saying so isn’t enough.
Resolving these disputes requires:
- A deep understanding of Canadian sales tax law
- The ability to educate CRA auditors on industry-specific practices
- Comprehensive, audit-ready documentation that aligns with legislative requirements
Don’t Wait Until It’s Too Late
It’s natural to hope an audit will be straightforward, or that the CRA will accept explanations provided by internal staff. But once a proposed assessment is issued, the matter becomes urgent—and the window to act is narrow.
By engaging DMA at the proposed assessment stage, companies gain access to a team of seasoned tax professionals who know how to work with CRA, respond strategically, and bring issues to resolution—before they spiral into bigger problems.
Success Story: Saving Millions
Our team worked with an energy client that received a proposed GST/HST assessment of over $125 million. The CRA questioned the client’s treatment of zero-rated sales and disallowed a sizable input tax credit claim due to perceived documentation issues. The assessment was so significant it posed a serious financial risk to the business.
Within just 30 days, DMA’s Canada Sales Tax team reviewed the audit findings, prepared detailed legislative arguments, and worked directly with CRA auditors to address the core issues. We helped clarify the client’s supply chain and transaction flow, provided missing documentation, and corrected key misunderstandings related to how the GST/HST should apply.
The result: CRA withdrew nearly the entire assessment. The client’s final liability was just $123,000—a staggering reduction and a testament to what’s possible when the right tax professionals are involved before the assessment becomes final.
Final Thoughts
Whether you’re an energy company, manufacturer, or service provider, the takeaway is the same: don’t face the CRA alone. If you’ve received a proposed assessment—or suspect one is coming—it’s time to call in the experts.
We’ve helped clients avoid millions in unwarranted tax assessments. We can help you, too.
Navigate Canada Sales Tax with DMA
Connect with our experts to protect your business from costly CRA GST/HST assessments and get expert support when it matters most.
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