Advance income tax ruling

Parties to a complex reorganization or rollover meet this term when they want the CRA’s position before they close, not after. The CRA describes a ruling as a way for taxpayers to confirm the tax implications of proposed transactions. For the risk that the CRA later challenges a reorganization, see whether the CRA can challenge a reorganization before a sale.

What the CRA says about rulings

• IC70-6 says rulings are generally not issued on completed transactions, though the Directorate may consider one on completed or partially completed transactions if the request is received before the transactions are completed
• Subject to any qualifications, caveats, disclaimers or comments stated in it, a ruling is regarded as binding on the CRA for the recipient taxpayer and the described transactions only to the extent there is no material omission or misrepresentation in the facts given
• The CRA’s sample ruling wording makes the ruling binding provided, among other things, that the proposed transactions are completed within the time limit stated in the ruling letter

What to ask

Ask whether a ruling was requested or issued, and read it against the final deal: a ruling covers the transactions and taxpayers it describes. Ask also whether the closing falls within its time limit. It is a different document from the Competition Bureau’s advance ruling certificate, which comes from competition law.