2014-0542061E5 Section 15(2.12), follow up to 2014-051943

Principal Issues: Whether the CRA would refund the excess Part XIII tax paid where a late-filed PLOI election and application for a refund of Part XIII tax are made more than two years after the end of the calendar year when the Part XIII tax was paid.

Position: No.

Reasons: In order for the Minister to refund an amount pursuant to subsection 227(6), the application must be made no later than two years after the end of the calendar year in which the Part XIII tax was paid.

Author: Ouimet, Jennifer
Section: 15(2), 15(2.11), 15(2.12), 227(6)

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                                                                                                                                                 2014-054206
                                                                                                                                                 J. Ouimet, CPA, CA

November 7, 2014

Dear XXXXXXXXXX:

Subject: Refund of Part XIII tax when PLOI election is late-filed

We are writing in response to a question you posed during our telephone conversation (Young / XXXXXXXXXX) on August 5, 2014, which was a follow-up to our technical interpretation 2014-051943. Your question concerns late-filed pertinent loan or indebtedness (“PLOI”) elections made pursuant to paragraph 15(2.11)(d) and subsection 15(2.12) of the Income Tax Act (“the Act”).

You described a situation where a loan becomes owing to a corporation resident in Canada (the “CRIC”) by the CRIC’s non-resident parent corporation (“Parentco”). The CRIC determines that paragraph 214(3)(a) applies to deem the amount of the loan to be a deemed dividend paid to Parentco and the CRIC remits the applicable Part XIII tax. More than 2 years after the end of the calendar year in which the Part XIII tax was paid, but within 3 years from the CRIC’s filing due-date for the year the loan was made, the CRIC and Parentco jointly file a PLOI election. The effect of filing the PLOI election is that the loan is no longer subject to Part XIII tax. You have asked us, if Parentco applies pursuant to subsection 227(6) of the Act for a refund of the tax, would the CRA refund the amount even though the application was not made within the two-year limit required by that subsection.

Our Comments

This technical interpretation provides general comments about the provisions of the Act. It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70‑6R6, Advance Income Tax Rulings and Technical Interpretations.

In general, subsection 227(6) of the Act provides for a refund of an overpayment of Part XIII tax provided that written application for the refund is made no later than 2 years after the end of the calendar year in which the excess amount was paid. In the situation you described, because the application was not made within the two-year limit, the CRA is not able to refund the excess Part XIII tax. However, in our view, the scenario you described is one that is unlikely to occur except in rare circumstances.

We trust our comments will be of assistance.

Yours truly,

Terry Young, CPA, CA
Manager, Administrative Law Section
International Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

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