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

In 2025, CRA’s Management Fees Audit Program is aggressively targeting corporations and family-owned businesses that pay management fees to related companies or shareholders. CRA’s automated cross-checking system now matches corporate deductions against the recipient’s reported income. When mismatches occur or agreements are missing, CRA immediately reassesses — often disallowing the deduction and adding gross negligence penalties. Even legitimate intercompany fees for administrative, accounting, or operational services are being flagged as “non-deductible.” At Mackisen CPA Auditors Montreal, we defend corporations and shareholders from CRA’s misinterpretation of management fees. Our CPA auditors and tax lawyers prove commercial purpose, prepare missing agreements, and eliminate double taxation. We don’t let CRA mistake business strategy for tax avoidance — we defend your right to operate efficiently and legally.

Legal and Regulatory Framework

Income Tax Act (Canada)

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

• Section 67: Requires expenses to be reasonable in the circumstances.

• Section 69(1): Ensures arm’s-length valuation for intercompany transactions.

• Section 163(2): Imposes gross negligence penalties that Mackisen can reverse with evidence of legitimate business purpose.

• Section 220(3.1): Enables CRA to cancel or reduce penalties under the Taxpayer Relief Program.
  Excise Tax Act (Canada)

• Management fees may trigger GST/HST obligations — Mackisen ensures consistent reporting and input tax credit recovery.
  Tax Administration Act (Quebec)
  Revenu Québec conducts coordinated QST and corporate audits on management fees. Mackisen manages both agencies for unified resolution and consistent documentation.

Key Court Decisions

Bédard v. The Queen (2022): CRA must prove lack of commercial substance before denying management fee deductions.
Thibault v. The Queen (2022): Written agreements and invoices establish the legitimacy of intercompany management fees.
Guindon v. Canada (2015): Honest reliance on professional advice prevents gross negligence penalties.
Venne v. The Queen (1984): CRA cannot deny deductions without verifiable evidence of abuse or false representation.
These rulings confirm that CRA must accept properly documented management fees as valid business expenses.

Why CRA Targets Management Fees

CRA audits management fees because they often involve related companies or family members. Common 2025 triggers include:

• Missing written management agreements.

• No invoices or proof of services rendered.

• Inconsistent amounts paid between years.

• Corporate structures involving holding or real estate companies.

• Duplicate deductions for similar services.
  CRA assumes avoidance — Mackisen proves commercial purpose.

Mackisen’s Management Fees Audit Defense Strategy

1. Audit File Review: Analyze CRA’s reassessment and identify disallowed or misclassified deductions.

2. Documentation & Agreements: Prepare or update management contracts, invoices, and supporting records.

3. Commercial Justification: Provide service descriptions and comparative industry benchmarks to prove reasonableness.

4. Formal Objection Filing: Submit a Notice of Objection to halt CRA enforcement and dispute reassessments.

5. Penalty & Interest Relief: File under Section 220(3.1) to remove all financial penalties and restore compliance.
   Our defense transforms CRA’s assumptions into documented proof of legitimate intercompany operations.

Real Client Experience

A Montreal real estate group was reassessed $318,000 for “non-deductible management fees.” Mackisen proved service delivery and CRA cancelled the entire reassessment.
A Quebec family business was penalized $142,000 after CRA claimed “unreasonable intercompany payments.” Mackisen reconstructed agreements and CRA dropped all penalties.

Common Questions

Can CRA deny management fees between related companies? Only without evidence of service or reasonableness — Mackisen provides full documentation.
Do management fees need contracts? Yes — Mackisen drafts or updates formal agreements to meet CRA standards.
Can CRA tax both payer and recipient? Yes, if not coordinated — Mackisen prevents double taxation by reconciling both sides.
Can CRA reverse penalties after reassessment? Absolutely — Mackisen files relief applications for full cancellation.

Why Mackisen

At Mackisen CPA Auditors Montreal, we are Canada’s leading experts in defending management fee audits. Our integrated team of CPAs and tax lawyers ensures every payment is documented, justified, and legally compliant. We act fast, present facts clearly, and defend strategically — because the cost of compliance should never outweigh the truth. When CRA audits your management fees, Mackisen audits their assumptions.
Call Mackisen CPA Auditors Montreal today for your 2025 Management Fees Audit Defense Consultation. The first meeting is free, and your protection starts immediately.