Our client is a global leader in online vehicle auctions operating in more than 10 countries, including Canada.
Our client was audited by the Canada Revenue Agency (CRA), resulting in a disallowance of Input Tax Credits (ITC) based on insufficient ITC supporting documentation. These insufficient documentation denials typically result from the exchange of documentation between the suppliers and recipients that is not in standard invoice format (e.g., electronic documentation or recipient-produced documentation). The CRA ITC denials are often issued in error, yet there is considerable technical support (i.e., legislative, case law, and administrative) for Input Tax Credits on non-invoice-driven purchases. The ITC denials can result from either a lack of technical knowledge from CRA auditors or a misguided policy of protecting the tax base even where the CRA position is technically unsupported. Unfortunately, this ITC denial is common, and DMA has found that both the CRA Audit and Appeals Departments often refuse to address these technical submissions and deny ITC based on misapplication of the Excise Tax Act.
On behalf of our client, DMA filed an appeal on this issue, and the initial appeal response was a denial in full, based on grounds that were a fundamental misapplication of the Excise Tax Act.
Our tax professionals are experts at applying their industry knowledge to assist in the reversal of CRA assessments that deny ITC for insufficient supporting documentation. The strategy applied in this specific appeal was customized to fit our client’s unique business needs, and included the following action items:
- Our team provided multiple detailed technical written submissions supporting the client’s ITC entitlement and addressed each of the CRA audit points raised in the audit denial letter.
- A series of follow-up calls were held with the Appeals Officer to walk through the facts and the technical provisions.
- When the Appeals Officer continued to misapply fundamental provisions of the Act, the issue was escalated to the Appeals Team Leader. A series of follow-up communications were provided to the Team Leader to address the concerns of the unsupported disallowance, and a series of additional written submissions and telephone calls were made.
- As a result of these submissions, the file was reassigned to a new Appeals Officer to revisit the facts and the key technical provisions.
Despite the client receiving a series of CRA appeal letters during the appeal process expressing an intention to disallow the appeal and to uphold the CRA audit assessment, DMA was successful in having a new Appeals Officer assigned. As a result, a final appeal decision was made to reverse the audit assessment and uphold the appeal in full—resulting in savings of $250,000.
DMA has a strong track record of success in filing CRA appeals on behalf of our clients. We combine strong technical arguments with a strategic approach, and invest the time and effort needed to ensure a successful result.