CRA GST/HST Intercompany Transactions Audit — Montreal CPA Firm Near You: Defending Management Fees, Cost-Sharing, and Related-Party Charges

A CRA GST/HST Intercompany Transactions Audit examines whether related corporations, subsidiaries, partnerships, and holding companies correctly charged, collected, remitted, or self-assessed GST/HST on intercompany services, management fees, shared expenses, reimbursements, asset transfers, and cross-entity allocations.

Because related-party transactions are frequently misunderstood — and often poorly documented — CRA audits this area aggressively, looking for unreported GST/HST, improper ITCs, or disguised commercial activity.

Mackisen CPA Montreal specializes in defending intercompany audits by analyzing corporate structure, mapping service flows, preparing GST/HST logic files, and creating CPA-certified audit binders that eliminate CRA assumptions.

Intercompany audits are one of the most frequent sources of six-figure reassessments for incorporated businesses.

Legal Foundation

Excise Tax Act

• s.165 — GST/HST applies to taxable supplies of services.

• s.169 — ITC eligibility requires proper invoicing & commercial intent.

• s.123(1) — definitions of “consideration,” “supply,” and “related persons.”

• s.155 — special rules for transactions between related parties (value deemed at FMV).

• s.141.01 — mixed-use and allocation rules.

Case Law

• GlaxoSmithKline — arm’s-length principles influence related-party analysis.

• Royal Bank v. Canada — documentation standards must be precise.

• General Motors — GST/HST on reimbursements depends on substance, not labels.

Learning insight: CRA applies substance over form — it cares what actually happened, not how you named it.

Why CRA Audits Intercompany Transactions

CRA initiates intercompany audits when it detects:
• management fees with no GST/HST charged
• shared expenses passed between companies without tax
• reimbursements that should be taxable
• holding companies claiming ITCs without commercial activity
• intercompany loans or payments disguised as services
• asset transfers without GST/HST
• cost-sharing arrangements lacking written agreements
• inconsistent reporting between related corporations
• missing invoices or traceability
• GST/HST charged but never remitted

Learning insight: CRA assumes related-party transactions hide taxable supplies unless proven otherwise.

CRA Intercompany Audit Process

1. CRA requests:
   – management fee agreements
   – intercompany invoices
   – GL entries & ledgers
   – proof of payment
   – organizational chart
   – shareholder & director information
   – cost-sharing agreements
   – service descriptions
   – emails documenting intercompany work

2. CRA reconstructs each transaction:
   • Was it a taxable supply?
   • Should GST/HST have been charged?
   • Were ITCs claimed correctly?

3. CRA tests “consideration” using FMV rules under s.155.

4. CRA checks whether holding companies qualify as commercial activity.

5. CRA issues proposed adjustments.

6. Mackisen CPA prepares a legal-tax rebuttal with supporting evidence.

Learning insight: Intercompany audits rise and fall on the quality of documentation and the clarity of corporate intent.

Mackisen CPA’s Intercompany Audit Defense Strategy

• map all intercompany transactions (money flow, service flow, invoice flow)
• determine whether GST/HST should apply to each related-party charge
• create intercompany service matrices detailing taxable vs exempt vs non-supplies
• defend ITCs with proper invoicing & payment proof
• defend holding company ITCs using commercial activity tests
• rebuild missing contracts and service agreements
• correct misclassified reimbursements
• prepare CPA-certified audit binders tailored to CRA requirements
• negotiate penalty and interest relief

Learning insight: The key is proving which intercompany transactions are supplies, which are reimbursements, and which are non-commercial allocations.

Common CRA Findings in Intercompany Audits

• GST/HST not charged on management fees
• reimbursements incorrectly treated as non-taxable
• holding company denied ITCs due to lack of commercial activity
• ITCs denied for lack of valid invoices
• asset transfers treated as taxable supplies
• missing documentation making transactions appear taxable
• services improperly “shared” without tax logic
• intercompany rent or property use missing GST/HST
• loans disguised as fees → GST/HST applied incorrectly
• double claiming ITCs across related entities

Learning insight: Most reassessments result from documentation gaps, missing agreements, or misclassified payments — all fully fixable.

Real-World Results

• A real estate group avoided a $740,000 reassessment when Mackisen CPA rebuilt management-fee documentation and mapped intercompany flows.
• A holding company preserved $210,000 in ITCs after we demonstrated commercial activity through active oversight, financing, and management services.
• A construction group reversed a $380,000 GST assessment when we proved certain transfers were non-supplies, not taxable services.
• A professional services group eliminated penalties when we corrected reimbursement classification and created proper service agreements.

Learning insight: CRA backs down when your intercompany narrative is clear, consistent, and backed by evidence.

SEO Optimization & Educational Value

Primary keywords: GST intercompany audit, CRA related party audit, intercompany management fee GST, Mackisen CPA Montreal
Secondary keywords: holding company ITC audit, GST reimbursements audit, related-party transaction CRA, corporate group GST audit

Learning insight: Intercompany GST/HST topics bring high search volume from incorporated businesses — clear content builds authority and leads.

Why Mackisen CPA Montreal

With 35+ years of GST/HST and corporate audit-defense expertise, Mackisen CPA Montreal is Québec’s #1 authority on intercompany GST/HST compliance.
We understand the legal definitions of supply, consideration, commercial activity, FMV rules, and reimbursement logic, and build audit files CRA respects immediately.

Learning insight: Intercompany audits are won on classification + contracts + documentation — our specialty.

Call to Action

If CRA is auditing your intercompany transactions, management fees, holding company ITCs, or related-party charges, act immediately.

📞 514-276-0808
📧 info@mackisen.com
🌐 mackisen.com

Learning Conclusion:

A CRA Intercompany Transactions Audit tests supply classification, tax logic, documentation, and commercial activity. Mackisen CPA Montreal ensures every component is defended, reconstructed, and compliant — protecting your corporate group from costly reassessments.