Loss Consolidation and Provincial GAAR
At the Canadian Tax Foundation 2006 annual conference, the CRA commented that it recognizes that, in some instances, loss-consolidation transactions can have the effect of shifting income and losses between provinces with a resulting increase or decrease in provincial tax revenue. The CRA has also stated that loss-consolidation transactions between related parties are not subject to the general anti-avoidance rule (GAAR) and has issued numerous advance tax rulings in this regard. Historically, Ontario has not had a tax collection agreement with the CRA and has not given any Ontario provincial advance tax rulings regarding Ontario GAAR and loss utilization transactions.
Question
How does the CRA plan to address provincial GAAR issues with respect to loss-consolidation ruling requests that significantly shift income among provinces?
Response
Before issuing a ruling, CRA Rulings will recommend that practitioners obtain comfort from provincial tax authorities to minimize the risk of double taxation.
Link to Source: https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/itnews-41/archived-income-tax-technical-news-no-41.html#P10