Section 162 — Income Tax Act: Failure to file return of income

Every person who fails to file a return of income for a taxation year as and when required by subsection 150(1) is liable to a penalty equal to the total of an amount equal to 5% of the person’s tax payable under this Part for the year that was unpaid when the return was required to be filed, and the product obtained when 1% of the person’s tax payable under this Part for the year that was unpaid when the return was required to be filed is multiplied by the number of complete months, not exceeding 12, from the date on which the return was required to be filed to the date on which the return was filed. Every person who fails to file a return of income for a taxation year as and when required by subsection 150(1), to whom a demand for a return for the year has been sent under subsection 150(2),

and by whom, before the time of failure, a penalty was payable under this subsection or subsection 162(1) in respect of a return of income for any of the 3 preceding taxation years is liable to a penalty equal to the total of an amount equal to 10% of the person’s tax payable under this Part for the year that was unpaid when the return was required to be filed, and the product obtained when 2% of the person’s tax payable under this Part for the year that was unpaid when the return was required to be filed is multiplied by the number of complete months, not exceeding 20, from the date on which the return was required to be filed to the date on which the return was filed. Notwithstanding subsections (1) and (2), if a non-resident corporation is liable to a penalty under subsection (1) or (2) for failure to file a return of income for a taxation year, the amount of the penalty is the greater of the amount computed under subsection (1) or (2), as the case may be, and an amount equal to the greater of $100, and $25 times the number of days, not exceeding 100, from the day on which the return was required to be filed to the day on which the return is filed. Every person who fails to file a return as required by subsection 150(3) is liable to a penalty of $10 for each day of default but not exceeding $50. Every person who fails to complete an ownership certificate as required by section 234, fails to deliver an ownership certificate in the manner prescribed at the time prescribed and at the place prescribed by regulations made under that section, or cashes a coupon or warrant for which an ownership certificate has not been completed pursuant to that section, is liable to a penalty of $50. Every person who fails to provide any information required on a prescribed form made under this Act or a regulation is liable to a penalty of $100 for each such failure, unless in the case of information required in respect of another person or partnership, a reasonable effort was made by the person to obtain the information from the other person or partnership; or in the case of a failure to provide a Social Insurance Number on a return of income, the person had applied for the assignment of the Number and had not received it at the time the return was filed. Every person or partnership who makes, or participates in, assents to or acquiesces in the making of, a false statement or omission in respect of claim preparer information required to be included in an SR&ED form is jointly and severally, or solidarily, liable, together with any claim preparer of the form, to a penalty equal to $1,000. A claim preparer of an SR&ED form is not liable for a penalty under subsection (5.1) in respect of a false statement or omission if the claim preparer has exercised the degree of care, diligence and skill to prevent the making of the false statement or omission that a reasonably prudent person would have exercised in comparable circumstances. The following definitions apply in this subsection and subsections (5.1) and (5.2). claim preparer , of an SR&ED form, means a person or partnership who agrees to accept consideration to prepare, or assist in the preparation of, the form but does not include an employee who prepares, or assists in the preparation of, the form in the course of performing their duties of employment. ( préparateur ) claim preparer information means prescribed information regarding the identity of the claim preparer, if any, of an SR&ED form, and the arrangement under which the claim preparer agrees to accept consideration in respect of the preparation of the form. ( renseignements relatifs au préparateur ) SR&ED form means a prescribed form required to be filed under subsection 37(11). ( formulaire de RS&DE ) Every person or partnership who fails to provide on request their business number, their Social Insurance Number, their trust account number or their U.S. federal taxpayer identifying number to a person required under this Act or the Regulations to make an information return requiring the number is liable to a penalty of $100 for each such failure, unless an application for the assignment of the number is made within 15 days (or, in the case of a U.S. federal taxpayer identifying number, 90 days) after the request was received; and the number is provided to the person who requested the number within 15 days after the person or partnership received it. Every person (other than a registered charity) or partnership who fails to file an information return as and when required by this Act or the regulations, or to comply with a duty or obligation imposed by this Act or the regulations is liable in respect of each such failure, except where another provision of this Act (other than subsection 162(10) or 162(10.1) or 163(2.22)) sets out a penalty for the failure, to a penalty equal to the greater of $100 and the product obtained when $25 is multiplied by the number of days, not exceeding 100, during which the failure continues. Every person (other than a registered charity) or partnership who fails to file, when required by this Act or the regulations, one or more information returns of a type prescribed for the purpose of this subsection is liable to a penalty equal to the greater of $100 and where the number of those information returns is less than 51, $10 multiplied by the number of days, not exceeding 100, during which the failure continues; where the number of those information returns is greater than 50 and less than 501, $15 multiplied by the number of days, not exceeding 100, during which the failure continues; where the number of those information returns is greater than 500 and less than 2,501, $25 multiplied by the number of days, not exceeding 100, during which the failure continues; where the number of those information returns is greater than 2,500 and less than 10,001, $50 multiplied by the number of days, not exceeding 100, during which the failure continues; and where the number of those information returns is greater than 10,000, $75 multiplied by the number of days, not exceeding 100, during which the failure continues. Every person (other than a registered charity) or partnership who fails to file, in the manner required by the regulations, one or more information returns of a type prescribed for the purpose of this subsection is liable to a penalty equal to where the number of those information returns is greater than 5 and less than 51, $125; where the number of those information returns is greater than 50 and less than 251, $250; where the number of those information returns is greater than 250 and less than 501, $500; where the number of those information returns is greater than 500 and less than 2,501, $1,500; where the number of those information returns is greater than 2,500, $2,500;

and in any other case, nil. Where a member of a partnership fails to file an information return as a member of the partnership for a fiscal period of the partnership as and when required by this Act or the regulations and subsection 162(10) does not set out a penalty for the failure, the partnership is liable to a penalty equal to the greater of $100 and the product obtained when $25 is multiplied by the number of days, not exceeding 100, during which the failure continues. Every person who fails to file a return of income for a taxation year as required by subsection 150.1(2.1) is liable to a penalty equal to $1,000. Every tax preparer who fails to file a return of income as required by subsection 150.1(2.3) is liable to a penalty equal to $25 for each such failure in respect of a return of an individual; and $100 for each such failure in respect of a return of a corporation. Every person who fails to comply with subsection 160.5(2) is liable to a penalty equal to $100 for each such failure. Where a penalty was payable under subsection 162(7.1) in respect of a failure by a member of a partnership to file an information return as a member of the partnership for a fiscal period of the partnership, a demand for the return or for information required to be contained in the return has been served under section 233 on the member, and a penalty was payable under subsection 162(7.1) in respect of the failure by a member of a partnership to file an information return as a member of the partnership for any of the 3 preceding fiscal periods, the partnership is liable, in addition to the penalty under subsection 162(7.1), to a penalty of $100 for each member of the partnership for each month or part of a month, not exceeding 24 months, during which the failure referred to in paragraph 162(8)(a) continues. If a partnership is liable to a penalty under any of subsections (5) to (7.1), (7.3), (7.4), (8) and (10), then sections 152, 158 to 160.1, 161 and 164 to 167 and Division J apply, with any modifications that the circumstances require, to the penalty as if the partnership were a corporation. [Repealed, 1998, c. 19, s. 188(4)] Every person or partnership who, knowingly or under circumstances amounting to gross negligence, fails to file an information return as and when required by any of sections 233.1 to 233.4 and 233.8, or where paragraph 162(10)(a) does not apply, knowingly or under circumstances amounting to gross negligence, fails to comply with a demand under section 233 to file a return is liable to a penalty equal to the amount determined by the formula ($500 × A × B) - C where A is where paragraph 162(10)(a) applies, the lesser of 24 and the number of months, beginning with the month in which the return was required to be filed, during any part of which the return has not been filed, and where paragraph 162(10)(b) applies, the lesser of 24 and the number of months, beginning with the month in which the demand was served, during any part of which the return has not been filed, B is where the person or partnership has failed to comply with a demand under section 233 to file a return, 2, and in any other case, 1, and C is the penalty to which the person or partnership is liable under subsection 162(7) in respect of the return. Where a person or partnership is liable to a penalty under subsection 162(10) for the failure to file a return (other than an information return required to be filed under section 233.1), if paragraph 162(10)(a) applies, the number of months, beginning with the month in which the return was required to be filed, during any part of which the return has not been filed exceeds 24, and if paragraph 162(10)(b) applies, the number of months, beginning with the month in which the demand referred to in that paragraph was served, during any part of which the return has not been filed exceeds 24, the person or partnership is liable, in addition to the penalty determined under subsection 162(10), to a penalty equal to the amount determined by the formula A - B where A is if the return is required to be filed under section 233.2 in respect of a trust, 5% of the total of all amounts each of which is the fair market value, at the time it was made, of a contribution of the person or partnership made to the trust before the end of the last taxation year of the trust in respect of which the return is required, where the return is required to be filed under section 233.3 for a taxation year or fiscal period, 5% of the greatest of all amounts each of which is the total of the cost amounts to the person or partnership at any time in the year or period of a specified foreign property (as defined by subsection 233.3(1)) of the person or partnership, and where the return is required to be filed under section 233.4 for a taxation year or fiscal period in respect of a foreign affiliate of the person or partnership, 5% of the greatest of all amounts each of which is the total of the cost amounts to the person or partnership at any time in the year or period of a property of the person or partnership that is a share of the capital stock or indebtedness of the affiliate, and B is the total of the penalties to which the person or partnership is liable under subsections 162(7) and 162(10) in respect of the return. In paragraph (d) of the description of A in subsection (10.1), subsections 94(1), (2) and (9) apply. For the purpose of paragraph (f) of the description of A in subsection 162(10.1), shares or indebtedness owned by a controlled foreign affiliate of a person or partnership are deemed to be owned by the person or partnership; and the cost amount at any time of such shares or indebtedness to the person or partnership is deemed to be equal to 20% of the cost amount at that time to the controlled foreign affiliate of the shares or indebtedness. For the purposes of paragraph (f) of the description of A in subsection 162(10.1) and subsection 162(10.2), in determining whether a non-resident corporation or trust is a foreign affiliate or a controlled foreign affiliate of a partnership, the definitions direct equity percentage and equity percentage in subsection 95(4) shall be read as if a partnership were a person; and the definitions controlled foreign affiliate and foreign affiliate in subsection 95(1) shall be read as if a partnership were a taxpayer resident in Canada. For the purposes of this subsection, paragraph (f) of the description of A in subsection 162(10.1) and subsection 162(10.2), a non-resident trust is deemed to be a controlled foreign affiliate of each beneficiary of which the trust is a controlled foreign affiliate for the purpose of section 233.4; the trust is deemed to be a non-resident corporation having a capital stock of a single class divided into 100 issued shares; each beneficiary under the trust is deemed to own at any time the number of the issued shares of the corporation that is equal to the proportion of 100 that the fair market value at that time of the beneficiary’s beneficial interest in the trust is of the fair market value at that time of all beneficial interests in the trust; and the cost amount to a beneficiary at any time of a share of the corporation is deemed to be equal to the amount determined by the formula A/B where A is the fair market value at that time of the beneficiary’s beneficial interest in the trust, and B is the number of shares deemed under paragraph 162(10.4)(c) to be owned at that time by the beneficiary in respect of the corporation. For the purpose of computing a penalty under subsection 162(1) or 162(2) in respect of a person’s return of income for a taxation year, the person’s tax payable under this Part for the year shall be determined before taking into consideration the specified future tax consequences for the year.