Asrani CPA, Professional Corporation

Taxpayer Wins: Tax Court Says CRA Must Honour Unclaimed GST Credits During Audit

A recent decision from the Tax Court of Canada delivers good news for GST/HST registrants. In Ontario Tire Stewardship v. The King (2026 TCC 77), the Court ruled that the Canada Revenue Agency (CRA) must recognize certain unclaimed Input Tax Credits (ITCs) when reassessing a taxpayer's GST/HST return—even if those credits relate to an earlier reporting period that would normally be outside the time limit for claiming them.

What happened?

Ontario Tire Stewardship was reassessed for GST/HST. During the audit, the organization argued that it had additional eligible ITCs that had not been claimed on its original GST/HST returns.

The CRA took the position that because the ITCs related to earlier reporting periods and the normal claiming deadline had expired, they could not be used to reduce the reassessment.

The taxpayer disagreed and appealed to the Tax Court.

The Court's decision

The Tax Court found in favour of the taxpayer.

The Court held that subsection 296(2) of the Excise Tax Act requires the CRA to take into account eligible unclaimed ITCs when determining a taxpayer's net tax during an assessment, even if the credits arise from an earlier reporting period that would otherwise be statute-barred.

In other words, the CRA cannot ignore legitimate GST/HST credits simply because they were not originally claimed on time if those credits are relevant when calculating the correct amount of tax payable in an assessment.

Why this matters

This decision could benefit many businesses that:

discover overlooked GST/HST input tax credits during a CRA audit;
identify accounting errors after filing GST/HST returns; or
receive reassessments where additional eligible ITCs were never claimed.

The ruling reinforces an important principle of Canadian tax law: taxpayers should generally pay the correct amount of tax—not more and not less.

What businesses should do

If your business is under a GST/HST audit or has received a reassessment:

Review whether any eligible ITCs were missed.
Gather invoices and supporting documentation.
Discuss with your tax advisor whether subsection 296(2) may apply.
Do not assume an expired ITC filing deadline automatically prevents the credit from reducing a reassessment.

Each case depends on its facts, but this decision provides taxpayers with stronger support when asking the CRA to recognize overlooked GST/HST credits.

Key takeaway

This is a significant taxpayer victory that reminds businesses to review all available GST/HST credits during an audit. While the decision does not eliminate normal filing deadlines, it confirms that the CRA must calculate the correct net tax where subsection 296(2) applies, rather than relying solely on procedural deadlines.

Canada Tax Update – Week of July 25, 2026
Top 3 Changes
1. Finance Canada releases draft tax legislation for consultation
Status: Proposed
On July 23, 2026, the Department of Finance released draft legislative proposals covering the Income Tax Act, Excise Tax Act, Global Minimum Tax Act and various technical amendments. The package also includes GST/HST amendments affecting agriculture and the federal printed book rebate.
Who is affected
Corporations
Tax professionals
GST/HST registrants
Agricultural businesses
Large multinational groups
Action Review the draft legislation to determine whether your clients are affected and consider submitting comments before the consultation deadline.
2. Consultation deadline announced
Deadline: September 4, 2026
Finance Canada is accepting comments on the draft legislation until September 4, 2026.
Recommendation Businesses, industry groups and professional advisors should review proposals now rather than waiting for final legislation.
3. No material new CRA or Ontario tax changes this week
A review of CRA, Ontario Finance, Revenu Québec, BC PST and Alberta tax updates found no additional material tax changes affecting most taxpayers since last week's report.
Rather than repeat previous announcements, this week's report focuses on genuinely new developments.
Changes Since Last Brief
✅ New Finance Canada draft legislation package released (July 23).
❌ No new broad CRA administrative change.
❌ No new Ontario tax legislation affecting general taxpayers.
Important Deadlines
September 4, 2026 – Finance Canada consultation on draft tax legislation.
September 8, 2026 – Federal pre-budget consultation closes.
September 15, 2026 – Personal income tax instalment due.
October 1, 2026 – BC PST expansion to specified professional services takes effect.
Advisor's Recommendations
Review the July 23 legislative package for corporate and GST/HST implications.
Inform business clients of the consultation period.
Continue preparing affected BC businesses for the October 1 PST changes.
Monitor for further CRA guidance over the coming weeks.

CRA Business Registration Changed This Week
As of July 14, 2026, the CRA’s Business Registration Online service can only be accessed after signing in through a CRA account.
This affects anyone registering:
• A new business number
• A GST/HST account
• A payroll account
• Additional CRA program accounts
The practical issue is access.
A new business owner who has not established a CRA account—or cannot complete identity verification—may not be able to complete an urgent registration immediately.
Business owners and advisors should confirm CRA account access before beginning the registration process.
This week’s broader federal and Ontario tax scan did not identify another material general tax change, so we are not repeating previously reported announcements simply to fill the update.
Need quick tax answers? Try our new AsraniCPA Virtual Tax Assistant — available 24/7 for CRA questions, T1/T2 filing, HST, payroll and more. Start here:

Canada Tax Assistant Ask AsraniCPA – Virtual Tax Assistant Welcome! Ask your Canadian tax or CRA questions below. This virtual assistant provides general information only. For personalized advice, please contact AsraniCPA directly.

CRA and Courts Crack Down on Siblings Misusing Company Funds for Personal Travel

Four siblings operating a large dairy farm business in Ontario, which manufactures cheese and yogurt sold across North America, are facing legal repercussions for misusing company funds. Each sibling is a shareholder and employee of the incorporated business.

For the tax year ending December 31, 2015, the Canada Revenue Agency (CRA) reassessed the corporation, disallowing nearly $500,000 in business expenses. Of these, around $355,000 were related to travel expenses, including meals. The CRA also reassessed the siblings individually, including these non-deductible travel expenses in their personal incomes as either shareholder or employment benefits. These amounts were significant, with the president being reassessed $211,621 for 2014 and $156,696 for 2015, covering travel expenses for himself, his wife, and his mother. The treasurer and director of human resources faced reassessments of $237,647 and $181,737, respectively. The third sibling's reassessed benefits totaled nearly $27,000, while the fourth's amounted to almost $50,000 over the two years.

In tax court, the siblings argued that all travel expenses were for business purposes, such as meeting suppliers and developing business markets, and should not have been included in their income. They also claimed that shareholder benefits should not apply to two of the siblings who only owned preferred shares.

The CRA disagreed, asserting that the disallowed travel expenses did not contribute to business income.

During the trial, the company's financial controller gave testimony that was deemed "vague and inconsistent." The judge found it unbelievable that the controller couldn't distinguish between personal and business expenses. The company president's testimony was also found lacking credibility, as he failed to provide reasonable explanations or documentary evidence to support the deductibility of the travel expenses.

The CRA auditor allowed approximately $200,000 in travel expenses with minimal supporting documents, such as credit card statements for trips to Dubai for an annual trade show and trips to Chicago, New York, Vancouver, San Diego, and Washington. However, travel expenses for trips to Paris, Aruba, Nassau, and Mont-Tremblant, as well as expenses paid to Sunwing Vacations, were disallowed, deemed personal expenses for the siblings and their family members.

Other disallowed expenses included charges incurred in Sint Maarten, meals at various restaurants, stays at the Fairmont Tremblant in Quebec, Ritz-Carlton in Aruba, and Ritz-Carlton in Grand Cayman, and expenses by a sibling's spouse at Holt Renfrew in Montreal.

The judge stated that reasonable expectations for supporting documentation, such as emails, meeting invitations, or agendas, were not met, leading to the conclusion that the expenses were non-deductible and personal expenses were correctly included as shareholder or employee benefits.

The siblings and the corporation appealed the decision. On June 17, 2024, the Federal Court of Appeal upheld the lower court's ruling in a brief six-page decision. The appellate court agreed that the tax court judge had appropriately weighed the evidence and noted the absence of documentary evidence to support the siblings' claims. The court also clarified that the Tax Act does not differentiate between common and preferred shareholders regarding shareholder benefits.

# Taxpayer Double Taxed in Canada and Abroad Wins Court Challenge Against CRA

**By AsraniCPA – Canadian Tax Insights**

International tax disputes are among the most complex issues Canadian taxpayers face. A recent Federal Court decision serves as an important reminder that taxpayers should not be forced to pay tax twice on the same income simply because two countries claim taxing rights. In this case, the court ruled in favour of a taxpayer after finding that the Canada Revenue Agency (CRA) had taken an unreasonable approach when dealing with a request for relief from double taxation. ([Tax Interpretations][1])

# # The Background

The taxpayer had significant connections to both Canada and the United Kingdom. Following a CRA audit, Canada reassessed the individual as a Canadian resident and taxed worldwide income. Later, the UK tax authority also assessed tax on much of the same income based on UK residency rules.

The result was a classic case of international double taxation—both countries sought to tax the same income.

Canada's tax treaties are specifically designed to prevent this outcome by establishing rules that determine which country has the primary right to tax certain types of income and by providing procedures for resolving disputes between tax authorities. ([Canada][2])

# # The CRA's Position

The taxpayer requested assistance under the Canada–United Kingdom tax treaty through the Mutual Agreement Procedure (MAP), a formal process that allows tax authorities in both countries to negotiate a solution when double taxation occurs.

However, the CRA concluded that the request had been made outside the treaty's time limits and declined to provide relief.

The taxpayer challenged that decision in Federal Court.

# # What the Court Decided

The Federal Court ruled that the CRA's interpretation of the treaty time limit was unreasonable.

The court found that the relevant limitation period should begin when the taxpayer actually became subject to the foreign tax assessment creating the double taxation problem—not simply when Canada issued its reassessment.

Because the taxpayer had acted within the proper timeframe after the UK assessment, the CRA's refusal to consider the request was set aside and returned for reconsideration. ([Tax Interpretations][1])

# # Why This Decision Matters

This decision is significant because it reinforces several important principles:

* Canadian tax treaties are intended to eliminate double taxation, not create procedural barriers.
* Taxpayers should have meaningful access to treaty relief when two countries tax the same income.
* The CRA must apply treaty provisions reasonably and fairly.
* Courts will intervene where administrative decisions frustrate the purpose of Canada's international tax agreements. ([Tax Interpretations][1])

# # What Canadian Taxpayers Should Do

Canadians with foreign income or international ties should:

* Keep detailed records of foreign tax assessments and tax payments.
* Claim available foreign tax credits where appropriate.
* Review applicable tax treaties whenever income may be taxable in more than one country.
* Seek professional advice promptly, as treaty deadlines can be critical.
* Consider requesting assistance under the Mutual Agreement Procedure if foreign tax credits alone do not eliminate double taxation. ([Canada][3])

# # AsraniCPA Insight

Cross-border taxation is becoming increasingly common as Canadians work, invest, or retire abroad. While Canada's network of tax treaties provides important protection against double taxation, obtaining relief is not always straightforward. This recent court decision confirms that taxpayers are entitled to a fair interpretation of treaty provisions and that the CRA cannot rely on an overly technical reading of procedural deadlines to deny legitimate claims.

If you have been taxed on the same income in both Canada and another country, professional advice can help determine whether foreign tax credits, treaty provisions, or the Mutual Agreement Procedure may provide relief.

---