Companies doing business in Quebec are governed by the Income Tax Act (I.T.A., federal agency) and the Taxation Act (provincial authority).
However, several regulations and ministerial directives complete these laws and often result in an indigestible finished product for the uninitiated because special rules apply to self-employed individuals, estates, non-Canadian residents, affiliated companies, etc.
In our tax system of self-assessment, an important verification mechanism is in place. The verification process on business premises can last a few hours or several weeks, while verification methods can be very diverse. At this stage, the taxpayer must cooperate diligently as the CRA (Canada Revenue Agency) has extensive powers to force the cooperation of less than willing taxpayer (sections 150, 231.1 or 231.2 I.T.A.)
Following the audit, the CRA will issue either a notice of assessment, reassessment, or additional assessment. So far, the investigation is “civil” and applies only to the collection of taxes. However, if in its routine audit the CRA discovers indications of fraud, tax evasion or false statements, the investigation may become criminal in nature. To the taxpayer, the degree of cooperation required is then reduced, while the consequences thereof are more important.
Several rules of criminal investigation must be followed by the CRA to obtain a search warrant (section 8 of the Charter), for example. Indeed, the taxpayer under criminal investigation is entitled to the rights and freedoms protected by the Charter of Rights and Freedoms, including the right to silence and protection against self-incrimination (section 7 of the Charter).
In order to object to an assessment of the Canada Revenue Agency, to determine the civil or criminal nature of an investigation, and to know your obligations and rights towards the CRA investigators, the advice of a professional lawyer can be essential.