When the CRA can reassess your return

When the CRA can reassess your return

Within certain time limits, the CRA can reassess your return or make additional assessments of tax, interest, and penalties. These time limits vary, depending on the type of corporation and the nature of the reassessment.

Normal reassessment period

The CRA can usually reassess a return for a tax year:

• within three years of the date it sent the original notice of assessment for the tax year, if the corporation was a CCPC at the end of the year

• within four years of the date it sent the original notice of assessment for the tax year, if the corporation was not a CCPC at the end of the year

Extended reassessment period

The normal reassessment period can be extended for an extra three years for several reasons, including any of the following:

• to carry back a loss or credit from a later tax year

• when a non-arm's length transaction (transaction as defined in subsection 247(1)) involving the corporation and a non-resident affects the corporation's tax

• if the corporation pays an amount or receives a refund of foreign income or profits tax

• when a reassessment of another taxpayer's tax for any of the above reasons affects the corporation's tax

• if the reassessment results from a non-resident corporation's allocation of revenue or expenses to its Canadian business or from a notional transaction, such as "branch advance", between the non-resident corporation and its Canadian business

• to give effect to the application of the non-resident trust rules in section 94 or to the application of the foreign investment rules under sections 94.1 and 94.2

• if the income is related to a foreign affiliate of the corporation (for tax years of the corporation starting after February 26, 2018)

• the reassessment is to carry back losses or certain tax credits and deductions where a prescribed form requesting the amendment has been filed on time

Non-resident non-arm's length person (extra six years)

For losses incurred in a particular tax year, the reassessment period for a preceding tax year to which those losses are carried back is extended six years beyond the normal reassessment period if both of the following apply:

• the losses are reduced as a result of a reassessment made to the particular tax year beyond the normal reassessment period for the year

• the reassessment to the particular tax year is made as a consequence of a transaction involving the corporation and a non-arm's length non-resident person

Provincial income reallocation (extra one year)

If the reassessment results from a provincial income reallocation, the normal reassessment period can be extended for one year from the later of:

• the day on which the CRA is advised of the provincial reassessment

• 90 days after the notice of the provincial reassessment was mailed

Substantive CCPCs - Deferring tax using foreign entities (extra one year)

The reassessment period for substantive CCPCs is extended one year beyond the normal reassessment period for any resulting assessment of Part IV tax because of a corporation being assessed or reassessed a dividend refund. This measure generally applies to tax years that end after April 6, 2022, with some exceptions.

Requirements for information and compliance orders

When a corporation contests a requirement for information or an application for a compliance order in court, a "stop-the-clock" rule applies. This rule extends the corporation's reassessment period by the period of time during which the requirement for information or compliance order is contested. The period generally starts when the corporation makes its first court filing to contest the requirement for information or compliance order and ends on the final disposition of the application (including any appeals).

Unlimited reassessment period

The CRA can reassess a return at any time, including when:

• the corporation has made a misrepresentation because of neglect, carelessness, wilful default, or fraud in either filing the return or supplying information required by the Act

• the corporation filed Form T2029, Waiver in Respect of the Normal Reassessment Period or Extended Reassessment Period, with a tax services office before the normal reassessment period expires. Form T2029 can be filed up to three more years after the end of the normal reassessment period if the waiver applies to one of the situations previously described under "Extended reassessment period"

  Note
  If you want to revoke a waiver that was previously filed to extend the normal reassessment period for a certain tax year, file Form T652, Notice of Revocation of Waiver, at your tax services office. The revocation will take effect six months after you file Form T652.

Sale or disposition of real estate

The CRA may at any time make an assessment, reassessment, or additional assessment of an income tax return beyond the normal reassessment period for any of the following reasons:

• the corporation does not report in its initial income tax return a sale or other disposition of a real or immovable property that is capital property of the corporation

• the partnership of which the corporation is a member did not report the sale or other disposition in the initial partnership information return

If the corporation later amends its return to report the disposition of the property (for example by filing a request for adjustments under subsection 245(6)), the CRA may still make a reassessment outside of the normal reassessment period within three years of the amendment being filed.

Under this extended reassessment period, the reassessment is limited to amounts reasonably relating to the unreported or previously unreported disposition of real or immovable property that is capital property of the corporation or partnership, as the case may be.

References
Subsections 152(3.1), 152(4), 152(4.01), and 152(4.1)
IC75-7, Reassessment of a Return of Income

How to request a reassessment

You can request a reassessment electronically using the latest commercial tax preparation software packages, or send a letter to the tax centre that serves the corporation. If you send a letter, state the name of the corporation, the business number, the tax year, and any details that apply. With your letter, include any relevant supporting information, such as revised financial statements or the General Index of Financial Information (GIFI) and schedules. If you are preparing your return using tax preparation software, submit the bar codes that contain the information needed to reassess your return. Do not send the entire T2 return.

To ask to carry back a loss or tax credit to a prior tax year, file whichever of the following schedules apply:

• Schedule 4, Corporation Loss Continuity and Application, to ask to carry back a loss

• Schedule 21, Federal and Provincial or Territorial Foreign Income Tax Credits and Federal Logging Tax Credit, to ask to carry back foreign tax credits on business income

• Schedule 31, Investment Tax Credit - Corporations, to ask to carry back an investment tax credit

• Schedule 42, Calculation of Unused Part I Tax Credit, to ask to carry back a Part I tax credit

You can file these schedules with the return on which you report the loss or earn the credit, or you can forward them separately to the tax centre that serves the corporation.

Reference
Subsection 152(6)

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