Vicarious Liability for Unpaid Taxes in Canada

Vicarious Liability for Unpaid Taxes in Canada

If you or your firm can’t pay for your provincial or federal taxes, this article is for you. The Canadian provincial and federal taxing statutes can impose secondary or vicarious liability on others for specific Canadian taxes that aren’t paid.

Usually, they are gathered on others’ behalf, for instance, HST, GST, EI, CPP, non-resident withholding taxes, and employee income tax withholdings. But, under some circumstances, the tax authorities of Canada bay also be permitted to follow directors (this includes de factor directors as well) for specific corporate taxes that aren’t paid.

For example, in an accounting firm in Edmonton, there might be many stakeholders, all of which can be held liable for specific corporate taxes to the degree of distributions that the corporation has made. For instance, children having their tuition fee submitted or children receiving gifts may be held accountable for the unpaid taxes of a parent.

Common-law partners, for example, partners, spouses, and former spouses, may be liable for the unpaid taxes of one another in some specific circumstances.

Vicarious liability for anyone else’s taxes: When should I be concerned?

This common circumstance emerges when an individual isn’t at their best regarding their financial situation and ends up transferring the property to a related economic or social group to ensure the creditors don’t reach for it.

But tax legislation doesn’t entail that the person who has transferred is even aware of any uncleared tax liability when they’re transferring the property. To be liable for these unpaid taxes, a corporation’s director doesn’t need to be aware of corporate withholding tax liabilities.

 a tax consultant in EdmontonHow can I avoid problems?

If anyone generously transfers property to you, ask regarding any uncleared taxes/contingent liabilities for these taxes.

If you’re a director, question the people overseeing statutory tax remittances to ensure that every amount has been paid. Don’t forget to ask about any contingent corporate tax liability.

If you’re facing actual or potential valuation of amounts (penalties, interest, and taxes) that represent the liabilities of other taxpayers, understand that there are many defences available.

For example, making an argument that the chief tax debtor didn’t have any tax liability.

Get experienced, personalized tax advice at a reasonable price with Faber LLP’s tax advisory services in Edmonton

Faber LLP’s tax consultant in Edmonton can help you navigate the intricacies of filing tax returns in Canada, allowing you to complete your tax requirements properly and on time.

Contact their tax planning consultant now!

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