When Can the CRA Reassess After the Standard Period?
In certain situations, the CRA is allowed to reassess a return for an additional three years beyond the normal reassessment period. This extended reassessment period applies to corporations and is triggered by specific tax events, including:
Loss carrybacks: Applying a non-capital or net capital loss from a future year to a prior tax year.
Non-arm’s length transactions involving non-residents that affect the corporation’s Canadian tax obligations.
Foreign tax matters, such as refunds of foreign income or profits taxes, or income related to foreign affiliates (post-February 26, 2018).
Reassessments affecting related parties, where another taxpayer’s reassessment impacts the corporation’s taxes.
Non-resident business structures, including notional transactions (like “branch advances”) or allocations of income and expenses from a foreign affiliate or parent.
- Trust and foreign investment rules, especially under sections 94.1 and 94.2 of the Income Tax Act.
Prescribed forms: Where a taxpayer files an amendment on time to carry back losses or claim specific credits, and CRA needs more time to process the change.
There are several exceptions that allow the CRA to reassess a return even after the normal reassessment window has closed. The CRA is permitted to reassess a tax return at any time, even after the standard reassessment period (3 or 4 years) has expired. This is known as the unlimited reassessment period and generally applies in two key scenarios:
Misrepresentation or Fraud: If a taxpayer has made a misrepresentation on their return due to neglect, carelessness, wilful default, or fraud—whether in filing the return or providing information required under the Income Tax Act—the CRA may reassess that return without any time limit.
Waiver by the Taxpayer: A taxpayer can voluntarily extend the reassessment period by filing Form T2029, Waiver in Respect of the Normal Reassessment Period, with the CRA before the standard reassessment period expires. This is commonly used during audits where more time is needed to resolve complex issues. The waiver allows reassessment up to three additional years, depending on the nature of the issue.
The above-noted scenarios are just a few of the many situations in which the CRA may extend—or even indefinitely extend—the normal reassessment period when seeking to reassess a taxpayer. This underscores the importance of being diligent and accurate when filing tax returns, and of remaining up to date with all required filings. Proactive compliance helps minimize the risk of reassessment and reduces exposure to penalties, interest, and prolonged audit scrutiny.
For questions or concerns, please reach out to Chris Bodnar.