US Companies Not Obligated to Provide Records to Canada on Non-Canadian Transactions, Lawyer Says
While the Canada Revenue Agency may seek broad financial records from non-resident companies, those companies aren't necessarily required to provide records of transactions not involving Canada, said Cyndee Todgham Cherniak, a lawyer with LexSage, in a blog post. "We are aware of at least one situation where a Canada Revenue Agency (“CRA”) auditor has demanded that a non-resident (U.S.) company to provide a complete electronic copy of their financial records for the purposes of a goods and services tax/harmonized sales tax audit," she said. "The CRA’s request covers financial records of all U.S. transactions and all world-wide transactions that have no connection whatsoever with Canada (in addition to Canadian sales transactions). In other words, the CRA is not permitting non-resident company to isolate transactions involving Canada -- they want everything."
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The Government of Canada doesn't seem to have the authority to require that a full financial database be provided, Cherniak said. While "a registrant may choose to send records to the CRA if they do not wish to pay for a CRA auditor to come to them," the request seems to raise some big legal issues, she said. For example, "what happens if the CRA imposes [goods and services tax or harmonized sales tax] on transactions that have no connection to Canada in order to arbitrarily increase the amount of the assessment?" she asked. This "very important given the increase in e-commerce businesses selling to Canadians" and "is a real issue that will become a bigger issue," Cherniak said.