[2013] 3 F.C.R. D-5
Income Tax
Practice
Judicial review pursuant to Income Tax Act, R.S.C., 1985 (5th Supp.), c. 1, ss. 231.6(4), 231.6(5) of Canada Revenue Agency (CRA) decision issuing foreign-based information requirement (requirement) requiring that applicant obtain, provide to CRA certain foreign-based information, documents—Applicant, Canadian resident corporation selling footwear—President of applicant owning 10 percent of applicant’s common shares while main shareholder owning 90 percent of applicant’s common shares—Main shareholder taking up residence in Bahamas, incorporating, wholly-owning four other corporations involved in application—Applicant receiving services from four corporations during operations, paying substantial amounts for variety of services during taxation years at issue—Minister of National Revenue (respondent) undertaking audit of applicant (transfer pricing audit or TPA), which included review of payments made by applicant to four corporations as consideration for services provided thereto—TPA also aiming to determine whether services provided in Bahamas or Canada; if provided in Bahamas, how services provided; whether consideration paid therefor benefiting applicant to determine whether transfer price paid by applicant constituting “arm’s length transfer price”—Requirement laying out 74 questions regarding four companies—When main shareholder in Bahamas informed of requirement, four corporations declining to provide some of requested information on basis such information not existing or confidential or release thereof would detrimentally affect competitive advantage of corporations—Applicant’s previously provided responses from audit queries considered incomplete or lacking in detail—Whether requirement unreasonable as being, in particular, overly broad, seeking irrelevant information—Information sought from applicant considered necessary to enable respondent to make specific determinations, verify information already provided—Link between information, documentation requested as well as purposes of TPA both obvious, reasonable—Act, s. 231.6 making clear that “foreign-based information or document” meaning any information that is available or located outside Canada that may be relevant to administration or enforcement of Act, including collection of any amount payable under act by any person—Documents requested in requirement needing to be both relevant, reasonable but threshold low; respondent’s powers wide-ranging—Requirement issued herein not inadvertently capturing irrelevant business dealings of four Bahamian companies since no evidence indicating that companies doing business with anyone other than applicant—Applicant only client of three companies involved; thus justifying scope of documentation, information requested—Given business arrangements in present case, obvious that information which CRA seeking may be part of corporate, other documents requested in requirement; not for applicant to say that such information could be ascertained by other means—Therefore, requirement not overly broad in scope since seeking relevant, necessary information to properly conduct TPA for taxation years at issue, assess inter alia, applicant’s tax liability—Proprietary or sensitive character of information not reason for finding notice of requirement unreasonable—Relevance, reasonableness of requirement having nothing to do with compellability of four Bahamian companies or main shareholder—Given that documentation, information maintained outside of Canada, CRA could do little more than issue requirement to gain access to records—No evidence extensive effort would be required to provide information requested or that provision thereof would destroy value of information—No basis upon which to set aside requirement—Finally, consequences of not providing documentation, information requested as set out in Act, s. 231.6(8) cannot have any connection to relevance or reasonableness of requirement—Main shareholder, four Bahamian companies controlled thereby not compellable but must realize that applicant’s inability to comply with requirement potentially leading to future negative consequences for applicant—Constituting purpose behind issuance of requirement under Act; consequences thereof seeming wholly appropriate in present case—Application dismissed.
Soft-Moc Inc. v. Canada (Attorney General) (T-502-12, 2013 FC 291, Russell J., judgment dated March 20, 2013, 35 pp.)