Canada: Income Tax

A corporation’s residence for tax purposes and the jurisdiction under which it is incorporated are legally distinct concepts. The corporate statute that governs a corporation, whether the Canada Business Corporations Act (“CBCA”) or a provincial equivalent, dictates its internal governance rules, but it does not, on its own, determine where the corporation is resident in Canada for the purposes of the Income Tax Act.

A taxpayer who discovers years of unreported income, unfiled returns, or missing foreign-information forms will usually ask one urgent question: how far back can the CRA go? Under the current Voluntary Disclosures Program, there is no single answer.

Canada’s tax system is a system of self-reporting. This feature is explicitly stated in subsection 150(1) of the Income Tax Act. This subsection requires taxpayers to file a tax return “without notice or demand for the return, for each taxation year of a taxpayer.”