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New penalties and refund holds start April 1, 2007 for delinquent tax remitters

Effective April 1, 2007 prescribed interest rates for the Goods and Services Tax, the Harmonized Sales Tax, and the Air Travellers Security Charge are harmonized with other federal acts. Here is what this means to you and your business clients:

• New failure to file penalty. The following penalties will be charged when the GST/HST return is filed late: 1% of the amount unpaid or outstanding for the reporting period as of the return due date, plus 0.25% of the overdue amount times the number of complete months the return was overdue, to a maximum of 12 months. When a GST/HST return is filed ate with a refund or rebate claim, CRA will assess a failure to file penalty on the amount owing on the late-filed GST/HST return.

• New Refund Hold. GST/HST rebate filers will receive their refund or rebate amount only if they have filed all returns for all applicable business program accounts required under the ETA, the ITA, the Excise Act, 2001, and the ATSCA.

• Refund Offsets. GST/HST refunds will be applied to amounts owed under the ETA, the TA, the Excise Act, 2001, or the ATSCA.

• Interest Calculations. The basic prescribed rate is based on the rate charged on 90-day Treasury Bills, adjusted quarterly, and rounded up to the nearest whole percentage (expressed as a percentage per year). The following calculation will replace the current penalty of 6%, which applied automatically whenever interest was charged:
  • interest on refunds of GST/HST Rebates owed to taxpayers: the prescribed interest rate will be the basic rate, plus 2%,
  • interest on an overdue amount will be the basic rate, plus 4%.

• Date interest begins. Interest on a refund of net tax and overpayment will be paid beginning 30 days after the later of:
  • the day the return is filed, and
  • the day after the end of your reporting period.

Interest on rebates will be paid beginning on the day that is 30 days after the rebate application is filed and ending on the day the rebate is paid.

This information is used with the permission of Knowledge Bureau, Inc. For more information go to www.knowledgebureau.com.