Frequently Asked Questions

• Q: Why should I get a lawyer? Isn't tax what accountants do?

  Q: Why should I get a lawyer? Isn't tax what accountants do?

  A: Accountants also provide tax advice for a fee. Accountants and lawyers approach the same issue from different perspectives, and have different skill sets. Accountants prepare tax returns, and can advise appropriately with regard to "how people usually file their returns based on the facts".

  Accountants do not have privilege, in the sense that although the documents and information you provide to your accountant may be confidential, any accountant can be compelled to provide that information to the Canadian tax or legal authorities at any time. In fact, accountants actually have a positive obligation to report you to the tax authorities in certain circumstances. A tax lawyer can never be compelled to provide information or documents to the Canadian tax or legal authorities. Accountants who are working under the instruction of a lawyer are also protected by legal privilege, as their work is being done in contemplation or anticipation of litigation. Although accountants do handle voluntary disclosures to the Canada Revenue Agency, they are not protected from being obliged to provide your documents and information to the Canadian tax and legal authorities, if, for whatever reason, you should decide not to go forward with the disclosure.

  Accountants can also file notices of objection and appear in informal cases in tax court. However, accountants cannot file a notice of appeal to the Tax Court of Canada, or appear before the Tax Court. Tax lawyers are also involved if the CRA disputes a position taken by a taxpayer, and provide a different perspective of the case.

  For many people, advice from an accountant will be sufficient. However, a tax lawyer approaches the same issues from a different perspective. Tax lawyers know the Income Tax Act, the regulations and understand what the perspective or position of the Canada Revenue Agency ("CRA") on the relevant issues, just as accountants do. However, tax lawyers are trained to approach a situation from the perspective of what the law, including the case law of the Tax Court of Canada, the Federal Court and the Supreme Court of Canada says, not just what the CRA says. Tax lawyers are involved at the beginning of more complicated transactions, and provide more comprehensive input and opinions on structures, with regard to whether they are legally compliant with the Canadian Income Tax Act and/or the applicable tax treaty or other relevant law.

  It is important to note that recent case law indicates that clients who receive a legal opinion as to the validity or appropriateness of their position will have a fixed three, four or up to seven year statute of limitations on reassessments by the CRA, depending on the circumstances. Without such an opinion, there is effectively no limit on when the CRA can reassess any tax year.

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• Q: What kind of law does your firm specialize in?

  Q: What kind of law does your firm specialize in?

  A: Unfortunately, "specialize" is a loaded word for Canadian lawyers, especially lawyers called to the bar in Ontario. You cannot say you "specialize" or are "a specialist" in any type of law unless you have received a certificate of specialization from the Law Society. Using the word specialize or specialist to describe your practice without such a certificate can get you in serious trouble, maybe not disbarred, but very serious trouble. So we make no claim to being specialists or specializing in anything, thank you very much! Also, there is no such thing as a certificate of specialization in tax law in Ontario, so we could not "specialize", even if we wanted to...

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• Q: You have restricted your practice to Canadian income tax, trusts and estates law, why? What does that mean?

  Q: You have restricted your practice to Canadian income tax, trusts and estates law, why? What does that mean?

  A: When you are called to the bar, every lawyer is presumed to be competent in every area of the law. Of course, this is clearly not the case. These days, no one can be even remotely close to competent in every area of law. A good lawyer knows his chosen field, but these days, that field is very likely to be "an inch wide and a mile deep" as they say. Garbutt Tax Law has "restricted its practice" to Canadian income tax, trust and estates law, as a means of identifying the types of law that we understand best. Tax law covers a wide field, including the taxation of corporations, trusts, partnerships and individuals, and, of course, non-residents of Canada who have or could have some interaction with the Canadian tax system. Trust law covers the roles and obligations of trustees, the rights of beneficiaries, and the law of the proper formation, administration and termination of trusts. Estates law is the law of wills and estates (the trust that arises on the death of an individuals). It involves the drafting of wills for individuals and couples that optimize the after-tax benefits to the beneficiaries, as well as advice regarding the probate and administration of such wills. Restricting our practice to the above areas of law means that the firm will not take securities law, family law or criminal law cases, etc., or effectively any case that is not fundamentally within one of areas with which we are familiar as a practical matter.

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• Q: I just got reassessed by the Canada Revenue Agency. What should I do?

  Q: I just got reassessed by the Canada Revenue Agency. What should I do?

  A: The Canada Revenue Agency (CRA) has the statutory power to audit and/or reassess any taxpayer if they believe that the taxpayer has not reported their income appropriately. The first thing you should do is check the date that the notice of reassessment was sent. You have 90 days from that date to file a notice of objection to the reassessment. The next thing you should do is decide if you want to fight the reassessment. Sometimes the CRA does notice things that people think they can get away with, or there may be errors in your original calculations.

  If you think you legitimately should not have to pay the extra tax, interest and potential penalties assessed, please contact us for an initial, no-obligation 20 minute phone consultation. We do not charge for such initial consultations, but this does not mean we have agreed in any way to represent you. In order for us to be engaged, we would require that you return to us a signed copy of our engagement letter, provide us with proof of your identity, and pay our retainer. In any event, even if you do not decide to retain us, or we prefer not to be engaged by you, any such preliminary discussion is covered by legal privilege, and we cannot be obliged to divulge anything with regard to the discussion.

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• Q: I may not have reported all of my worldwide income. What can I do?

  Q: I may not have reported all of my worldwide income. What can I do?

  A: It is possible for Canadian taxpayers who have not reported all of their worldwide income to make a voluntary disclosure to the Canada Revenue Agency. If the disclosure is accepted as being voluntary and complete, then no penalties will apply. You will still have to pay the tax, plus interest at a reduced rate for some years, the full rate for more recent years. This procedure takes a while to complete, and there are legal fees and accounting costs (to prepare the revised tax forms), but it is worthwhile in that it makes it easier for you to sleep at night as you will have one less thing to worry about. We can guide you through the process efficiently and effectively.

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• Q: I have been seeing these ads on TV showing a law firm that says they can protect me from the CRA, is that what you do?

  Q: I have been seeing these ads on TV showing a law firm that says they can protect me from the CRA, is that what you do?

  A: Anyone who has watched TV or listened to radio in Canada knows which ads that you are referring to. Our perspective is that these ads are designed to give the impression that the law firm advertized can somehow make the Canada Revenue Agency (CRA) go away, or prevent the CRA fom seizing your assets, or allow you to negotiate the amount of tax owed. They do not say that they can make the CRA go away, as I think that would be false advertizing, but I think the ads skirt very close to the edge of what is acceptable lawyer advertizing.

  Most of the time, to be frank, when the CRA reassesses someone, they have some grounds. Sometimes that can be disputed. But if the taxpayer has failed to respond to the reassessment, or the CRA can show that there is a risk of the money disappearing or assets being dissipated, no lawyer, or anyone for that matter, can prevent the CRA from seizing assets. And you certainly can’t make them "back off" just by looking at them with the extra-special "tough-lawyer-with-very-slick-hair" look.

  It is very complicated. Sometimes the CRA can just seize assets and bank accounts. If the oney owed is tax that was withheld at source on payroll, or if there is GST/HST owing, the taxpayer is actually that belongs to the government. The CRA takes no chances in such circumstances and will often seize first and ask questions later. Sometimes it is possible to negotiate a payment schedule with the CRA, provided that there is some money put up front to show a capacity and intent to pay. We may be able to buy you some time, but there is no way you can avoid paying the tax. It is important to remember that debts to the Crown do not go away in bankruptcy, so declaring bankruptcy will not solve the problem either.

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• Q: My company wants to set up an operation in Canada, can you help me with that or do you just do the tax part?

  Q: My company wants to set up an operation in Canada, can you help me with that or do you just do the tax part?

  A: We can help you make arrangements to deal with the appropriate lawyers in the appropriate jurisdiction(s). Canada is a big place, and the law in each of the 13 provinces and territories is different, so you may need a number of lawyers, depending on what it is that you want to do. There are corporate law, labour law and perhaps regulatory law issues. But the first issue is determining how you are going to hold your Canadian business, both in terms of the formation of the entity, and who is going to hold the shares or other interests in that entity, if a legal entity is required. You may just want to start out as a branch so that you can deduct the expenses of setting up the business in your home country. There are a lot of tax issues that need to be worked out first. Therefore we can help you establish your business, first by helping you understand the tax issues involved in want to do, and determining how you go about doing that in Canada in a tax efficient way over the short-term and in the long term. Once we have that figured out, then we will assist you by taking advantage of our connections in various provinces to implement the structure consider optimal. Effectively, there is the practice of tax law, which involves the research and drafting of legal advice and opinions regarding tax efficient structures, then there is what could be called "the business of tax law", which is implementing that structure using whatever resources are necessary in each case.

  We can work with a variety of lawyers in a number of jurisdictions to try to provide you with a flat-fee estimate for the entire project. We then co-ordinate with counsel, accountants, head hunters and other consultants to assist you in setting up your business in the most efficient manner possible. Using a tax lawyer to set up your business in Canada will be more expensive than doing it yourself, or just working it out along the way. However, in the long run, the any additional costs will be paid back many times over by the reduction in hassle, tax and liability from doing things right the first time.

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• Q: Do you practice international tax law?

  Q: Do you practice international tax law?

  A: There is no such thing as "international tax law". Each country taxes on the basis of its own set of rules. However, as anyone who has ever done any international transactions of any size can tell you, the domestic tax laws of all the various countries do not always work well together. Although legitimate corporations and law-abiding individuals do not mind paying tax, they certainly do have reason to object to paying tax in more than one jurisdiction on the same income or profit. The problem is that cross-border transactions, investments and involvements can result in tax arising in more than one country. We practice Canadian tax law, and not the law of any other country. But we also practice cross-border tax law in the sense that we are very aware of the potential for double (or triple or quadruple) tax in countries other than Canada. As a result, when we advise clients, we take into account the fact that transactions involving entities in different countries can give rise to taxation elsewhere. We are also very used to dealing with entities and structures that interact with more than one jurisdiction, and so we understand that any Canadian tax structuring has to take into account the tax rules of other jurisdictions, as advised by counsel qualified in those jurisdictions.

  We have also worked extensively with Canada’s tax treaties with various countries, and we are therefore aware of all the potential advantages that can be granted under the treaties, and also some of the very important traps for the unwary. We have also worked on several international transfer pricing matters, both at the planning stage, and after a controversy with the Canadian tax authorities has arisen.

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