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CHAPTER 3:
Liability for Tax, Income
Determination, and
Administration

© 2013 McGraw-Hill Ryerson Ltd.

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Liability for Tax and Income Determination
I.
II.
III.
IV.

Sources of Canadian Tax Law
Liability for Tax
Determination of Income
Administration of the Income Tax
System

© 2013 McGraw-Hill Ryerson Ltd.

I.

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Sources of Canadian Tax Law

There are three separate sources that govern income tax law in Canada:
1.

Statute law:
a.
b.

2.
3.

Federal Tax system – The Income Tax Act.
Separate provincial income tax act

Common law
International tax conventions

© 2013 McGraw-Hill Ryerson Ltd.

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Common Law
 Is an integral source of tax law.
• CRA often views a transaction differently than the taxpayer. • Disputes are settled in the Canadian court system.

 Sufficient jurisprudence helps define and interpret tax laws.
• Jurisprudence is now the primary source of definitions and interpretations. © 2013 McGraw-Hill Ryerson Ltd.

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International Tax Conventions


Reciprocal tax treaties with foreign countries in order to: a) rationalize and define the jurisdictional authority; and,
b) avoid the incidence of double taxation.




Tax conventions are designed to limit the right of one jurisdiction to tax income.
Treaties takes precedence over Income Tax Act (“the
Act”)

© 2013 McGraw-Hill Ryerson Ltd.

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Sources of Canadian Tax Law
 Federal tax law is the responsibility of the
Department of Finance.
 Assessing and collecting tax is the responsibility of Canada Revenue Agency (“CRA”).

© 2013 McGraw-Hill Ryerson Ltd.

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Interpretation Bulletins and Information
Circulars
 In order to assess tax, CRA must interpret the law.
 CRA publishes its interpretation of the tax laws in two forms:
- Interpretation