CRA Management Fees Audit 2025 — Defend Your Corporate Deductions, Prevent Reassessments, and Stop CRA Penalties

In 2025, CRA’s Management Fees Audit Program is one of the most aggressive corporate review initiatives in Canada. CRA’s audit technology now compares management fee deductions claimed by corporations with the corresponding income reported by related companies or shareholders. If CRA finds discrepancies or believes fees were “unreasonable,” it can deny the deductions, reassess multiple years, and impose penalties up to 50% for alleged gross negligence. Many businesses use management fees legitimately for administrative or strategic services — but CRA often treats them as tax avoidance. At Mackisen CPA Auditors Montreal, we defend business owners, holding companies, and family corporations against CRA’s misinterpretation of management fees. Our CPA auditors and tax lawyers prepare detailed service documentation, prove commercial purpose, and reverse disallowed deductions. We don’t let CRA question your business logic — we prove it with precision.

Legal and Regulatory Framework

Income Tax Act (Canada)

• Section 18(1)(a): Allows deduction of expenses incurred to earn income, including management fees paid for legitimate services.

• Section 67: Requires management fees to be reasonable in relation to the benefit received.

• Section 69(1): Governs transactions between non-arm’s-length parties to ensure fair market value pricing.

• Section 220(3.1): Permits CRA to cancel penalties and interest under the Taxpayer Relief Program.

• Section 163(2): Imposes gross negligence penalties for false or overstated deductions, which Mackisen can eliminate.
  Tax Administration Act (Quebec)
  Revenu Québec applies similar rules for provincial corporate audits. Mackisen ensures both jurisdictions recognize the legitimacy of your intercompany fees.

Key Court Decisions

Bédard v. The Queen (2022): CRA cannot deny management fees without proving they were excessive or unrelated to income generation.
Thibault v. The Queen (2022): Proper contracts and service documentation protect corporations from CRA reassessments.
Guindon v. Canada (2015): Honest accounting or interpretation errors do not justify gross negligence penalties.
Jordan v. The Queen (2009): CRA must provide evidence that payments lacked business purpose before disallowing deductions.
These rulings confirm that CRA management fee audits can be successfully defended through documentation and reasonableness.

Why CRA Targets Management Fees

CRA audits management fees because they often involve related parties and intercompany transfers. Common 2025 triggers include:

• Large fees between associated corporations or holding companies.

• Lack of written management service agreements.

• Fees not matching actual service delivery or accounting records.

• Deducted fees with no reported income by the recipient.

• Sudden changes in fee structure or amounts.
  CRA assumes manipulation — Mackisen proves value.

Mackisen’s Management Fee Audit Defense Strategy

1. Audit File Review: Examine CRA’s audit notice and determine which transactions or entities are under scrutiny.

2. Documentation Reconstruction: Prepare or update management agreements, invoices, and supporting evidence of services rendered.

3. Reasonableness Analysis: Benchmark fees against industry norms to prove commercial justification.

4. Objection & Negotiation: File a Notice of Objection and negotiate directly with CRA’s audit and appeals divisions.

5. Penalty & Interest Relief: Apply under Section 220(3.1) to cancel penalties arising from administrative discrepancies.
   Our defense ensures CRA recognizes legitimate management structures and respects your right to deduct business expenses.

Real Client Experience

A Montreal corporate group was reassessed $245,000 after CRA disallowed intercompany management fees. Mackisen provided contracts and service records and secured a full reversal.
A Quebec holding company faced $118,000 in penalties for “unsubstantiated fees.” Mackisen demonstrated administrative oversight and achieved 100% penalty cancellation.

Common Questions

Can CRA deny management fees between related companies? Yes, if documentation is missing — Mackisen ensures all agreements are compliant and defensible.
What is considered a reasonable management fee? It depends on business size, scope of services, and market rates — Mackisen provides a comparative analysis to prove fairness.
Can CRA tax both payer and recipient? Yes — but Mackisen prevents double taxation through coordinated representation.
What if CRA claims my fees are “too high”? Mackisen demonstrates commercial purpose, workload, and cost basis to justify the expense.

Why Mackisen

At Mackisen CPA Auditors Montreal, we are Canada’s foremost defenders of intercompany transactions and management fee deductions. Our multidisciplinary team combines tax law, accounting, and negotiation expertise to protect your corporation from CRA’s overreach. We act fast, prepare thoroughly, and negotiate decisively — because your business deserves to be recognized for what it truly is: legitimate and compliant. When CRA audits your management fees, Mackisen audits their assumptions.
Call Mackisen CPA Auditors Montreal today for your 2025 Management Fee Audit Defense Consultation. The first meeting is free, and your protection starts immediately.