9 October 2025 APFF Financial Planning Roundtable, Q.1

Where the controlling individual of a registered plan is subject in a year to the 50% tax payable pursuant to s. 207.04(1) for a year on the FMV of a non-qualified or prohibited investment, CRA allows (pursuant to s. 207.07(1)) a set-off of an allowable refund of that tax (generated pursuant to s. 207.04(4)) against that tax if the allowable refund arises in the same year, so that no net amount has to be remitted pursuant to the RC339 form. What if the allowable refund arises in the following year but before the RC339 return is required to be filed, e.g., because a non-qualified investment was not disposed of until early in that subsequent year? CRA stated:

Where the obligation to pay the 50% tax and the entitlement to a refund of that tax do not arise in the same calendar year, subsection 207.07(1) requires payment of the tax, even if the entitlement to a refund arises before the deadline for filing the prescribed form, i.e., June 30 of the year following the end of the calendar year. No administrative relief is contemplated in such a situation where the conditions for the application of subsection 207.07(1) would not be satisfied.

CRA went on to indicate that if the allowable refund arose in a subsequent year, it was to be dealt with separately by CRA pursuant to s. 207.07(2).

Where the controlling individual of a registered plan is subject in a year to the 50% tax payable pursuant to s. 207.04(1) for a year on the FMV of a non-qualified or prohibited investment, CRA allows a set-off of an allowable refund of that tax (generated pursuant to s. 207.04(4)) against that tax if the allowable refund arises in the same year, so that no net amount has to be remitted pursuant to the RC339 form. What if the allowable refund arises in the following year but before the RC339 return is required to be filed, e.g., because a non-qualified investment was not disposed of until early in that subsequent year?

CRA indicated that the set-off was only available pursuant to s. 207.07(1) where the allowable refund arose in the same year as the tax. Regarding where it arose in a subsequent year, it stated:

Where entitlement to a refund of the 50% tax arises in the calendar year following the year in which the tax arose, subsection 207.07(2) permits a refund of the allowable amount of the tax provided for in subsection 207.04(1) for a calendar year, to the extent that the refund has not been applied to reduce the 50% tax payable for the year. Paragraph 207.07(2)(b) provides that the Minister shall refund the amount after sending the notice of assessment if the person applies for the refund within three years after sending the original notice of assessment for the year.