Annex – Transition Agreement concerning transitional strategies and undertakings for the transition to single administration of Ontario Corporate Tax

BETWEEN:

The Canada Revenue Agency (referred to in this Agreement as "CRA"), as represented by the Commissioner of Revenue

AND:

The Government of Ontario (Ministry of Revenue (OMoR)) (referred to in this Agreement as "Ontario"), as represented by the Commissioner of Revenue

Recitals

WHEREAS, on October 6, 2006, the Government of Canada and the Government of Ontario signed the Memorandum of Agreement Concerning a Single Administration of Ontario Corporate Tax (MOA) which outlines the various undertakings by both Canada and Ontario concerning the single administration of Ontario Corporate Tax;

AND WHEREAS, on June 13, 2007, the Lieutenant-Governor-in-Council approved and made Order-in-Council O.C. 1349/2007 assigning responsibility for the administration of the Corporations Tax Act (CTA) and other provincial tax statutes to the Ontario Minister of Revenue, including authority to enter into an agreement under section 98.1 of the Corporations Tax Act on behalf of Ontario with the approval of the Lieutenant-Governor-in-Council;

AND WHEREAS, on July 31, 2007, the CRA and OMoR announced the signing of the CTAO/CTAR Human Resources Agreement that outlines employment opportunities at the CRA for Ontario employees and describes the arrangements for the transition of employees who choose to accept job offers from the CRA;

AND WHEREAS the CRA and OMoR have participated in joint transition planning to develop strategies and arrangements and identify responsibilities for the implementation of the single administration of Ontario Corporate Tax.;
The parties hereto agree as follows:

1. Purpose

On April 3, 2008, CRA will begin to assume responsibility in respect of the administration of Ontario Corporate Tax. Paragraph 4.3(a) of the Memorandum of Understanding Concerning Administration of Ontario Corporate Taxes, set out in Annex C to the MOA, requires the CRA and Ontario to enter into a Transition Agreement.  The purpose of this agreement is to set out the roles and responsibilities of the CRA and Ontario during the transition to the single administration of Ontario Corporate Tax (which includes Corporate Income Tax, Corporate Minimum Tax, Capital Tax, and the Special Additional Tax on Life Insurance Companies) for taxation years ending on or before December 31, 2008.

To this end CRA and Ontario have worked, and will continue to work, through a collaborative planning process to develop and adopt strategies respecting transition and to identify key milestones for the purpose of ensuring the continuity of quality service to corporations carrying on business in Ontario and their compliance with applicable tax legislation during the transition period.

Ontario and the CRA enter into this Agreement in order to facilitate a smooth transition to a single corporate tax administration for Ontario by the CRA as per the MOA, and pending an amendment of the existing Tax Collection Agreement between the Government of Canada and the Government of the Province of Ontario for taxation years ending after 2008.

The CRA and Ontario agree to make best efforts to ensure that this administration commences on April 3, 2008.

2. Process

The CRA and Ontario:

  1. have identified certain officials who are responsible for administering this Agreement.  The officials and their responsibilities are listed in Appendix A; and
  2. agree that with the approval of the signatories, or the authorized officials listed in Appendix A, this Agreement may be amended at any time by an exchange of letters between the parties.

3. Transition

On April 3, 2008, the CRA will commence providing administrative services in respect of the CTA.  The CRA will undertake responsibilities on behalf of Ontario in respect of the following:

  1. the conduct of integrated audits of Ontario corporations by CRA which covers corporations tax returns under the CTA and corporations tax returns under the federal Income Tax Act.  Corporations will be risk assessed for provincial issues based on jointly developed risk assessment criteria;
  2. the desk audit processing of corporations tax returns under the CTA, including processing reassessments, and adjustments resulting from loss carry-back requests, amended returns, taxpayer requests, voluntary disclosures, and objections and appeals;
  3. the administration of Ontario refundable corporate tax credits;
  4. the administration of taxpayer objections and any appeals that may arise from objections administered by the CRA;
  5. the provision of rulings and interpretations; and
  6. the administration of taxpayer enquiries resulting from the services described in paragraphs A to E.

4. Governance and Dispute Resolution

The CRA and Ontario agree:

  1. to maintain a joint governance structure to coordinate the transition to single administration that will among other matters, resolve or escalate issues where consensus cannot be reached and track and report progress toward mutually identified deliverables and milestones;
  2. that any dispute arising from this Agreement will be referred to the joint governance structure and, if the dispute is not resolved at that level, it will be referred to the Commissioner of Revenue, Ontario and the Commissioner of Revenue, CRA for resolution.  Furthermore, if the Commissioners are unable to resolve the dispute it will be referred to the Minister of Revenue and the Minister of National Revenue for resolution; and
  3. to each appoint representatives to participate on specialized groups to coordinate the transition of work.

5. Consultations and Quality Assurance

The CRA agrees to consult with Ontario on precedent-setting tax rulings, interpretations, audit assessments, and objections and appeals that deal with Ontario-specific issues.

The CRA and Ontario agree to the establishment of an enhanced quality assurance package that meets the needs of both the CRA and Ontario and which may include interim measures.

The CRA and Ontario undertake to notify each other, on a timely basis, of any proposed change in their respective policies, statutes or regulations that may affect this Agreement or their ability to administer Ontario Corporate Tax.

6. Communications

The CRA and Ontario acknowledge that coordinated communication with external stakeholders is a key requirement for successful transition and therefore agree to work collaboratively to communicate with stakeholders as required.

If the CRA uses the Ontario logo in any form of communication during the transition period, the CRA agrees to adhere to the Visual Identity Directive of the Province of Ontario, which outlines the standards and guidelines for use of the Ontario logo in any form of communication.

7. Information Technology

The CRA and Ontario agree that they will each maintain any systems infrastructure required to enable and support administration of Ontario Corporate Tax.

In particular, Ontario agrees to provide the CRA with read and write access to systems as required for the purposes of Corporate Tax administration.

8. Information Sharing

The CRA and Ontario agree to provide each other with information as identified by the parties for the purposes of this Agreement but only to the extent that any applicable laws and policies of the CRA and Ontario do not preclude its provision and that the provision of the information is in accordance with any applicable memoranda of understanding concerning information sharing that have been entered into between the CRA and Ontario.

The CRA and Ontario agree that any proprietary information provided by the CRA or Ontario (referred to as the "originating party") for any purpose related to this Agreement remains the property of the originating party and must not be disclosed or used for another purpose by the receiving party without the prior written consent of the originating party.

9. Training and Knowledge Transfer

The CRA and Ontario agree to collaborate as required to ensure that the appropriate training and reference material is available to employees who administer the CTA.

The CRA is committed to using former Ontario employees who accept job offers with the CRA in the most effective manner to support delivery of Ontario corporations tax related functions.

10. Costs

The CRA and Ontario agree that:

  1. effective upon implementation of this Agreement, a number of activities will be undertaken by the CRA on a cost recovery basis.  The activities and amounts to be reimbursed will be determined in accordance with Appendix B; and
  2. Ontario may request that the CRA consider undertaking additional activities on behalf of Ontario on a cost recovery basis.

11. Third Party Assignment

Neither party shall be permitted to assign any of its rights or delegate any of its obligations under this Agreement without the prior written consent of the other party.

12. Coming Into Force

This Agreement is consequential to the Minister of Revenue of Ontario entering into an agreement pursuant to section 98.1 of the Corporations Tax Act with the Minister of National Revenue for the provision of services by the CRA in relation to the administration of the Corporations Tax Act.

This Agreement comes into effect on the day that it is last signed by the CRA or Ontario.

THIS AGREEMENT ENTERED INTO ON

___________________________, 2008

 

___________________________, 2008

 

_________________________
FOR Canada Revenue Agency
William V. Baker
Commissioner of Revenue
___________________________
FOR Ontario
Angela Longo
Commissioner of Revenue

Appendix A: List of Officials (Article 2)

For the Canada Revenue Agency:

A. For the purposes of the overall administration of this agreement:

Assistant Commissioner
Corporate Strategies and Business Development Branch (CSBDB)
Canada Revenue Agency
Ottawa, Ontario
K1A 0L5

B. For the purposes of amending appendix B:

Director General
Corporate Tax Administration for Ontario Directorate (CTAO)
Corporate Strategies and Business Development Branch
Canada Revenue Agency
Ottawa, Ontario
K1A 0L5

For Ontario:

A. For the purposes of the overall administration of this agreement:

Assistant Deputy Minister
Ministry of Revenue
Oshawa, Ontario
L1H 8H5

B. For the purposes of amending appendix B:

Executive Director
Corporate Tax Administration Redesign Project (CTAR)
Ministry of Revenue
Oshawa, Ontario
L1H 8H5

Appendix B: Cost Recovery (Article 10)

  1. The term "fiscal year" in this Appendix means the period beginning on April 1, in one year and ending on March 31, in the next calendar year.
  2. Costs will be recovered via quarterly advance payments based on the estimated costs below. The first instalment will be recovered by the CRA in April of the applicable fiscal year, the second in July, the third in October, and the final in January. The CRA will reconcile the estimates with the actual expenditures to-date in advance of the fourth payment. 
  3. Developmental costs incurred during the 2007-2008 fiscal year for cost recovery services will be recovered by the CRA in April 2008.
  4. Recovery of costs for a fiscal year will be based on the estimates set out in paragraph G. These estimates will be reviewed yearly. Estimates for the 2008-2009 fiscal year will be incorporated into paragraph G on or before March 31, 2008.
  5. Ontario agrees and authorizes the recovery of costs from the personal income tax revenues collected by the CRA on behalf of Ontario that are paid to Ontario pursuant to the Canada-Ontario Tax Collection Agreement.
    Costs will be recovered, and withheld from the first payment to Ontario in the respective month indicated in paragraph B.
  6. The CRA agrees that the Auditor General of Ontario (AGO) may examine any books, records and systems that may be relevant in order to gain assurance of the accuracy of the payments made by Ontario under this Agreement.
    The time at which the AGO may start the review will be subject to the agreement of the Commissioner of the CRA. Copies of the reports prepared by the AGO resulting from such reviews will be shared with the Commissioner of the CRA.
  7. Summary of estimates for:
  1. Audit
  2. Rulings and Interpretations
  3. Objections and Appeals
  4. Desk Audit Processing
  5. Tax Credits
  6. Capital Tax and Ontario Special Additional Tax on Life Insurance Companies
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