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ARTICLE · 03 OCTOBER 2017

A Cautionary Tale : Now You See It, Now You Don't!

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Subsection 222(1) of the Excise Tax Act (Canada) creates a deemed trust in favour of the Crown for collected but unremitted goods and services tax/harmonized sales tax ("GST/HST")...

CanadaInsolvency/Bankruptcy/Re-Structuring
Natasha De Cicco
Natasha De Cicco
Daniel T Richer
Daniel T Richer
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In Canada v Callidus Capital Corporation,[1] the Federal Court of Appeal has concluded that the bankruptcy of a tax debtor after a secured creditor has already received proceeds from the sale of the tax debtor's assets does not reverse the deemed trust for GST/HST on the proceeds in the hands of the secured creditor.  This decision may have significant implications for the secured creditor community as secured creditors who receive sale proceeds may be personally liable to CRA for the tax debtor's unremitted GST/HST notwithstanding the tax debtor's bankruptcy.

1. The Deemed Trust for Unremitted GST/HST

Subsection 222(1) of the Excise Tax Act (Canada)[2] creates a deemed trust in favour of the Crown for collected but unremitted goods and services tax/harmonized sales tax ("GST/HST").  The deemed trust attaches to all of the property of the tax debtor (which would include proceeds of such property) and ranks ahead of the claims of secured creditors, except a

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