CRA indicates that there is no set-off of an allowable refund of s. 207.04(1) tax of a controlling individual against that tax if the allowable refund arose in the following year

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

Neal Armstrong. Summaries of 9 October 2025 APFF Financial Planning Roundtable, Q.1 under s. 207.04(4) and s. 207.07(2).