Canadian Tax FAQs
Answers to common questions about CRA audits, tax disputes, tax debt, voluntary disclosures, tax residency and other Canadian tax matters.
Answers to Common Canadian Tax Questions
Navigating Canada’s tax system can be complex, particularly when dealing with the CRA, tax disputes, collection action, residency issues, or significant transactions. Below are answers to common Canadian tax questions involving CRA audits, objections, Tax Court appeals, tax debt, voluntary disclosures, real estate, tax residency, and other tax-law matters.
What triggers a CRA audit?
CRA audits are generally selected through risk-assessment systems and may also arise from information obtained from third parties, related taxpayers, previous compliance activity, or other sources.
Factors that may attract CRA attention can include unusual changes in reported income or expenses, repeated losses, discrepancies between tax filings and third-party information, large or unusual deductions, unreported income concerns, GST/HST issues, real estate transactions, and other indicators of potential non-compliance.
Being selected for an audit does not mean the CRA has concluded that you did anything wrong. An audit is a review intended to determine whether income, deductions, credits, taxes, and other reported amounts are properly supported.
If you are under audit, learn more about our CRA audit representation.
What should I do if I disagree with a CRA assessment or reassessment?
If you believe the CRA has incorrectly assessed or reassessed you, you may have the right to file a formal Notice of Objection.
An objection allows you to challenge the CRA’s factual or legal conclusions and provide supporting documents and arguments to CRA Appeals.
The applicable deadline depends on the type of taxpayer and assessment, so it is important not to assume that every objection has the same 90-day deadline.
Learn more about our CRA tax objection services.
How long do I have to file a Notice of Objection?
For many individual income tax assessments, the deadline is the later of one year after the filing due date for the return or 90 days after the date of the assessment or reassessment.
Corporations generally have 90 days from the date of the notice. Many GST/HST objections also have a 90-day deadline.
If the deadline has been missed, an extension application may be available. It generally must be made no later than one year after the original objection deadline, and statutory requirements must be satisfied.
Because deadlines vary by type of assessment, the notice should be reviewed promptly.
What happens if my CRA objection is denied or confirmed?
If CRA Appeals confirms the assessment, issues a reassessment, or otherwise decides the objection and you continue to disagree, you may be able to appeal to the Tax Court of Canada.
For many income tax and GST/HST matters, the general appeal deadline is 90 days from the relevant CRA notice of confirmation, reassessment, or redetermination.
In certain circumstances, an appeal can also be started before CRA Appeals has made a decision if the applicable statutory waiting period has passed.
Learn more about our Tax Court appeal representation.
What is the CRA Voluntary Disclosures Program (VDP)?
The Voluntary Disclosures Program (VDP) allows eligible taxpayers to correct past tax errors or omissions and receive relief from some penalties and interest.
Under the CRA framework effective October 1, 2025, eligible unprompted applications normally receive 100% penalty relief and 75% interest relief. Eligible prompted applications normally receive up to 100% penalty relief and 25% interest relief.
Eligible VDP applicants also receive protection from referral for criminal prosecution regarding the information disclosed. The underlying tax itself generally remains payable.
Learn more about our Voluntary Disclosures Program services.
Can I make a voluntary disclosure after the CRA contacts me?
Possibly.
Under the current VDP framework, receiving certain CRA compliance communications does not automatically make a taxpayer ineligible. Some taxpayers who have been prompted by CRA communications may still qualify for partial relief.
However, a taxpayer who is already under an audit or investigation concerning the information being disclosed is generally not eligible.
Timing therefore matters. A taxpayer considering disclosure should assess eligibility before providing information to the CRA.
Learn more about our Voluntary Disclosures Program services.
What can the CRA do to collect unpaid tax debt?
The CRA has significant statutory collection powers.
Depending on the debt and circumstances, the CRA may:
- Apply refunds or other federal payments against the balance owing;
- Issue a Requirement to Pay to an employer, bank, or other third party;
- Register the tax debt against property;
- Pursue seizure or sale remedies; and
- Take other collection steps permitted by law.
A Requirement to Pay can redirect money that would otherwise have been paid to the taxpayer directly to the CRA.
Learn more about our CRA collections and tax debt services.
Can I negotiate a payment arrangement with the CRA?
Yes. If you cannot pay your CRA debt immediately, you may be able to arrange a series of payments based on your financial circumstances.
The CRA may ask for information about your income, expenses, assets, liabilities, and ability to pay. Once an arrangement is established, payments and ongoing tax obligations generally need to remain current.
A payment arrangement does not normally reduce the legally valid principal tax debt, and interest may continue to accrue.
The CRA may also apply certain refunds or government payments against the debt even while a payment arrangement is in place.
Learn more about our CRA collections and tax debt services.
Can the CRA waive penalties and interest?
In appropriate circumstances, yes.
The taxpayer relief provisions give the CRA discretion to cancel or waive certain penalties and interest.
Relevant circumstances can include:
- Events outside the taxpayer’s control;
- Certain CRA actions or delays;
- Financial hardship or inability to pay; and
- Other circumstances recognized under the taxpayer relief provisions.
Taxpayer relief is discretionary and generally does not cancel valid principal tax.
Learn more about our CRA penalty and interest relief services.
Can the CRA reduce the actual tax I owe?
The CRA generally cannot simply negotiate a legally valid principal tax debt in the same way a private creditor might negotiate a settlement.
However, the principal amount may change if the underlying assessment is successfully challenged or adjusted, and other legal mechanisms may apply depending on the circumstances.
A remission order is one exceptional remedy that can potentially provide full or partial relief from qualifying federal tax itself, but remission is rare and is considered a remedy of last resort.
The appropriate option depends on whether the issue concerns an incorrect assessment, collection difficulty, penalties and interest, insolvency, or truly exceptional circumstances.
Learn more about our CRA collections and tax debt services and CRA remission order services.
What is a CRA remission order?
A remission order is a rare and extraordinary form of relief that can provide full or partial relief from federal tax, penalties, interest, or certain other amounts administered by the CRA.
It is generally considered only where other available remedies cannot provide appropriate relief and where collection would be unreasonable or unjust, or remission would otherwise be in the public interest.
The CRA reviews remission requests but does not itself have authority to issue the order. If the CRA supports the request, the matter may proceed to the Minister of National Revenue, who may recommend remission to the Governor in Council. Only the Governor in Council can issue the remission order.
Learn more about our CRA remission order services.
When can a CRA decision be challenged in Federal Court?
Certain discretionary CRA administrative decisions may be challenged through judicial review in the Federal Court.
Examples can include some taxpayer relief decisions, Voluntary Disclosures Program decisions, and other discretionary matters where there is no ordinary statutory right of objection or appeal.
Judicial review is different from challenging whether a tax assessment itself is correct. Tax assessments are generally dealt with through the objection and Tax Court process.
Where a second administrative review is available, that process will generally be pursued before judicial review. An application for judicial review generally must be filed within 30 days after the relevant decision is communicated, subject to any different statutory rule.
Learn more about our judicial review of CRA decisions.
How does Canada determine whether I am a resident for tax purposes?
Canadian tax residency is determined by examining all relevant facts, particularly the individual’s residential ties with Canada and the length, purpose, intent, and continuity of their presence inside or outside Canada.
Important residential ties can include:
- A home in Canada;
- A spouse or common-law partner in Canada;
- Dependants in Canada; and
- Other personal, economic, or social ties.
The often-mentioned 183-day rule is not the only residency test. Someone can be a factual resident despite spending fewer than 183 days in Canada, while someone without significant residential ties may become a deemed resident after being in Canada for 183 days or more in certain circumstances.
Tax treaties can also affect the result.
Learn more about our Canadian tax residency services.
Is profit from selling real estate a capital gain or business income?
It depends on the circumstances.
A property held as a long-term capital investment may produce a capital gain, while a property acquired or held primarily for resale may produce business income.
Relevant factors can include:
- The taxpayer’s intention when acquiring the property;
- The length of ownership;
- The frequency of similar transactions;
- Renovation or development activity;
- The financing structure;
- Rental history; and
- The circumstances surrounding the sale.
Special residential property flipping rules can also deem certain gains to be business income.
Learn more about our real estate tax services.
What is Canada’s 365-day property flipping rule?
A gain from the sale of a Canadian housing unit, or a right to acquire one, that was owned or held for less than 365 consecutive days is generally deemed to be business income rather than a capital gain, unless a statutory exception applies.
Exceptions can apply to qualifying circumstances such as certain cases involving:
- Death;
- Household changes;
- Marriage or relationship breakdown;
- Serious illness or disability;
- Employment relocation;
- Involuntary job loss;
- Insolvency;
- Personal safety concerns;
- Destruction or expropriation; and
- Other qualifying events set out in the legislation.
Even where a property is owned for more than 365 days, ordinary tax principles can still result in business-income treatment depending on the facts.
Learn more about our real estate tax services.
What happens if the CRA starts a criminal tax investigation?
The CRA’s Criminal Investigations Program investigates significant cases of tax evasion, tax fraud, and other serious tax offences.
An investigation may involve:
- Interviews;
- Banking and financial records;
- Third-party evidence;
- Search warrants;
- Seizure of paper or electronic records; and
- Forensic analysis.
Where appropriate, the CRA may refer a case to the Public Prosecution Service of Canada, which independently determines whether prosecution should proceed.
A criminal tax investigation is different from an ordinary administrative audit and can raise important Charter, search-and-seizure, and self-incrimination issues.
If you learn that you are under criminal investigation, obtaining legal advice before participating in a voluntary interview or providing potentially incriminating statements can be important.
Learn more about our criminal tax investigation services.
Can a tax lawyer help before I sell or reorganize my business?
Yes.
Obtaining tax advice before a significant transaction can help identify Canadian income tax, corporate tax, GST/HST, shareholder, capital gains, and anti-avoidance issues before the transaction becomes legally binding.
Depending on the circumstances, planning may involve:
- Corporate reorganizations;
- Holding-company structures;
- Share or asset sales;
- Section 85 rollovers;
- Estate freezes;
- Shareholder distributions;
- Business succession; or
- Other transaction-specific tax planning.
Many planning opportunities become more limited after agreements are signed or transactions are completed.
Learn more about our Canadian tax planning services.
What is the difference between a CRA audit, objection, and Tax Court appeal?
These are different stages of a tax dispute.
A CRA audit examines tax filings, books, records, and other information to determine whether the taxpayer’s reporting is correct.
If the CRA issues an assessment or reassessment that the taxpayer disputes, a Notice of Objection can generally be filed with CRA Appeals within the applicable deadline.
If the objection is not resolved satisfactorily, the taxpayer may then have the right to appeal to the Tax Court of Canada, which is independent of the CRA.
A common progression is:
CRA Audit → Assessment or Reassessment → Notice of Objection → Tax Court Appeal
Not every matter follows all of these stages. Certain discretionary CRA decisions may instead require administrative review or Federal Court judicial review.
Learn more about our CRA audit representation, tax objection services, and Tax Court appeal representation.