Prioritization of certain advance tax rulings a positive for investment, experts say

At the direction of the federal government, the Canada Revenue Agency (CRA) is prioritizing requests from corporate taxpayers for advance income tax rulings related to large-scale nation-building projects — housing and infrastructure and the like. While tax experts say the announcement is a welcome move to promote investment, no details about the initiative have been provided and no funding has been allocated to it.

The federal government announced the prioritization of advance tax rulings for projects of national importance in the spring economic update on Tuesday. Priority will also be given to requests for advance tax rulings related to investments that “enhance productivity and strengthen critical sectors,” such as clean economy initiatives, the update said.

Corporate taxpayers ask for advance tax rulings to obtain certainty about the tax implications of potential business decisions. But the rulings, which are binding, are typically “never as quick as a lot of taxpayers would like,” said Fred O’Riordan, EY Canada’s national leader of tax policy in Ottawa. The rulings can sometimes take months, said Brian Ernewein, senior advisor, national tax, with KPMG LLP in Ottawa.

Ryan Minor, tax director with CPA Canada in Sudbury, Ont., said he believes requests for advance tax rulings are generally on the basis of first come, first served. When new tax measures are introduced, such as global minimum tax, CRA staff may be allocated to the related advance tax rulings, he said.

Making certain rulings a priority “puts more pressure on [the CRA] to produce,” O’Riordan said, which is positive. “You want to have tax certainty in order to encourage investments to go ahead.”

No details about the prioritization initiative were provided in the spring economic update, nor did the update show that funds were allocated to it.

The rulings are “a specialized area,” O’Riordan said, referring to CRA staff. “It’s not just anybody that can be productive in the advance rulings.”

Ernewein suggested that funding or other support for the prioritization work may be needed to avoid “degrading the quality or the timeliness” of the rulings that aren’t being prioritized.

When asked if the prioritization of advance tax rulings related to certain large projects potentially provides a competitive advantage for big business, O’Riordan said it didn’t. “You want to have tax certainty in order to encourage investments to go ahead, and so it’s not a ‘big guy’ advantage,” he said. “It’s an advantage that facilitates investment that creates well-paying jobs.”

“On a level, it makes sense to prioritize things that are going to bring investment into the country,” Minor said. The feds “want to improve certainty for people who want to invest here — and that certainly is a good thing.”

O’Riordan also said he prefers that the CRA focus on taxpayer services such as advance tax rulings and such functions as dispute resolution, rather than tax areas that are arguably over-resourced, such as audits. “They [the CRA] do come up with a lot of assessments that are not technically sound, and they get overturned eventually,” he said.

The spring economic update also noted that Budget 2025 allocated an additional $146 million to CRA resources over five years to administer the clean economy investment tax credits, which will help the agency reduce a backlog of claims this year and ensure a more timely delivery of the credits going forward.