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Understanding the Ongoing Tax Battle Between the CRA and the Big Banks

The Canada Revenue Agency (CRA) and the six major banks of the country have been in a feud over the past few years. The banks claim that because of a disagreement over dividends, an assessment for over $6 billion is taking place. This amount splits among the various banks, and each of them claims that the issue revolves around dividend rental arrangements.

The Parties Involved

The parties involved include Bank of Montreal, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, National Bank of Canada, Royal Bank of Canada and Toronto-Dominion Bank, referred to as the Big Six. All of them claim that the CRA and other provincial parties continue to assess them despite all beliefs of clear tax filings. An approximate $6.3 billion in tax and interest from all parties combined are being sought after by the authorities.

Details of the Dispute

The details regarding the dispute have been extracted from court documents such as court filings, as well as shareholder reports. The problem centres around tax deductibility of dividends. Normally, companies can deduct an amount of dividend from their income considering the dividend they receive from the shares they hold of another Canada-based company.

Coins falling out of a jar.

There are some exceptions to this rule which allows one party to secure the dividend as the profit or loss opportunity rests on another party. These are referred to as “dividend rental arrangements”. The banks claim this has led to the assessments being made.


The banks claimed that while these dividend rental arrangements were under the knowledge of the CRA, the problems started taking place in 2016 when the government stated that a taxpayer will make dividend-equivalent payments to the other party as well that can be taxed off from.

The banks also state that some of the reassessments being made are on transactions that are 20 years old. The Big Six have banded together and denied dividend deductions based on dividend rental arrangement, with a few of them being specific regarding the dividends in question.

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