Introduction: Fiera Foods Company v HMK, 2023 TCC 140

Fiera Foods Company, started in 1987, has been in the business of producing frozen bakery products for retailers in Canada and the United States. Prior to the recent success in the Tax Court of Canada, the last time Fiera Foods was on the headline news was back in 2017, after the company pleaded guilty and paid $300,000 in the death of a temporary worker in 2016. The tragic story may not seem directly relevant to tax laws at first glance. Yet, the Tax Court of Canada nevertheless addressed the “morality” issue in its recent decision, Fiera Foods Company v HMK, 2023 TCC 140, likely due to the notoriety associated with Fiera Foods, arising at least in part out of extensive writeups in the news media.

Fiera Foods Company v HMK, is also one of the latest cases in Canada that examined the tax implications of the popular practice of hiring temporary workers through third-party agencies. Specifically, the Tax Court of Canada reviewed past jurisprudence on 1) eligibility of Input Tax Credits (“ITC”); 2) differentiation of an issue of sham/fraud and of morality; and 3) obligations of an HST/GST registrant.

Case Summary of Fiera Foods Company

Fiera Foods Company has long adopted the practice of using temporary workers in their business of producing frozen bakery products. It is estimated that during the relevant period, about 60 to 65 per cent of Fiera Foods Company’s workforce were provided by temporary worker agencies. Fiera Foods Company did not treat the temporary workers as employees and paid amounts to the agencies for the temporary workers directly. The temporary workers would then be paid by the agencies with which they were associated, often by cash. The court records showed that there was extensive proof of internal communications as well as paperwork, demonstrating that these temporary workers were not considered employees. Invoices also evidenced the amount of HST/GST that Fiera Foods Company paid to the agencies. However, the CRA did notice that the agencies remitted a lot less HST/GST than the agencies collected from Fiera Foods Company.

The Canada Revenue Agency (“CRA”) reassessed Fiera Foods Company’s claim for ITCs from January 1, 2011, to January 31, 2014. The CRA denied a total of $5,758,469.46 of ITCs claimed by Fiera Foods Company and imposed penalties under section 285 of the Excise Tax Act (Canada) on the basis that 1) Fiera Foods Company was not entitled to the ITCs since the amount they paid were not for taxable supplies; 2) Fiera Foods Company did not satisfy the documentary requirements in subsection 169(4) of the Input Tax Credit Information (GST/HST) Regulations; and 3) Fiera Foods Company knowingly made a false statement in the returns and either knew that the agencies did not make taxable supplies or should have inquired about the agencies.

The Tax Court of Canada allowed the appeal of Fiera Foods Company and referred the reassessments back to the CRA for reconsideration, on the basis that Fiera Foods Company is entitled to the ITCs. The Court emphasized that the actions of the agencies, which are all arm’s length parties to Fiera Foods Company, are not the actions of Fiera Foods Company and “nothing in the scheme of the [Excise Tax Act] leads to a contrary conclusion.” In addition, the Court did not accept the CRA’s position that Fiera Foods Company did not satisfy the documentation requirements. Although some information on the supporting documentation could not be verified, the information that is required by the relevant regulations, including the names of the agencies, the dates of the invoices, the amount paid for the supplies provided by the agencies, the amount of tax paid, and the registration numbers of the agencies, is confirmed and available. In particular, the Court found that even the CRA auditor who worked on the file had no issue in calculating the amount of ITCs claimed by Fiera Foods Company.

The Morality Issue in Tax Law

The Court, while addressing whether Fiera Foods Company is entitled to the claimed ITCs, first examined the morality argument raised by the CRA’s Canadian tax lawyers. Specifically, the CRA’s Canadian tax counsel argued that 1) Fiera Foods Company was aware or should have been aware that the agencies were not bona fide employment agencies, and 2) Fiera Foods Company made a false statement in the returns due to its failure to make inquiries regarding the supply of the temporary workers from the agencies. In other words, the CRA believed that although Fiera Foods Company itself was not in direct violation of tax and other areas of law, the company’s failure to identify illegal practices of its workforce suppliers should prevent the company from being entitled to the ITCs claimed in relation to the workforce suppliers.

The Tax Court of Canada clearly rejected the CRA’s position, citing the decision of the Federal Court of Appeal in Canadian Imperial Bank of Commerce v Canada, 2013 FCA 122: “…nothing in the Income Tax Act expressly permits or requires the Minister of National Revenue, or the Courts, to apply the Income Tax Act differently depending upon the morality of the taxpayer’s conduct.” Similarly, nothing in the Excise Tax Act that governs HST/GST matters expressly permits or requires the CRA or the Courts to apply the legislation differently depending upon the morality of a taxpayer’s conduct. In addition, the Court also clarified that this general principle of disregarding the morality of conduct equally applies to the conduct of the persons administering the Canadian tax laws. The Court, therefore, unfortunately cannot vacate an assessment predicated on tax officials’ conduct, including reprehensible conduct, their motivations, abuse of power, abuse of process, as long as the tax assessment meets the required standards.

The Standard for Required Documentation to Claim ITCs

The CRA’s Canadian tax litigation lawyer further submitted that Fiera Foods Company did not satisfy the documentation requirements under subsection 169(4) of the Information Regulations, due to the lack of evidence corroborating that the suppliers listed on the invoices were the actual suppliers. In particular, the CRA alleged that any records provided by the Fiera Foods Company were not reliable, were inconsistent, were contradicted by the testimony of witnesses, and could not be accepted as genuine and truthful. The Court, upon addressing the authenticity and trustworthiness of Fiera Foods Company’s records, rejected the CRA’s argument that Fiera Foods Company did not meet the documentation requirements.

The Court first distinguished the decision in Westborough Place Inc. v The Queen, 2007 TCC 155, where the definition of “supporting documentation” was found to be not exhaustive, as evidenced by the use of the word “includes” before the list of the various types of documents. Since the definition of “supporting documentation” is introduced with the word “means”, the term is therefore clearly exhaustive, as discussed in paragraphs 269 to 271 of the Fiera Foods Company decision. The Supreme Court of Canada had also accepted that “exhaustive definitions are generally introduced using the verb, means, while non-exhaustive definitions are introduced with the verb, includes,” following The King v McColman, 2023 SCC 8.

Furthermore, the Court affirmed that the relevant regulations did not set out a general requirement for the supporting documentation to be issued or signed by the supplier. Instead, the definition of supporting documentation only requires the documents to be issued or signed by the supplier where the documentation does not “fit within one of the document types outlined” in the regulations or “fall within the meaning ‘forms’ as set out in the preamble to the definition.” In summary, the documentation requirement set out by the relevant regulations focuses on the adequacy of the evidence but not the form of the evidence, as long as there is “sufficient information to determine the amount of the credit.”

Pro Tips – Understand What Qualifies As “Supporting Documentation”

For Canadian tax purposes, what records qualify as sufficient supporting documentation depend on the relevant regulations and legislation. At times, there can be no specific requirements in forms, such as the documentation requirement for ITC claims. In other situations, the requirement can be very specific due to the language of the legislation. For example, subsection 241(10) of the Income Tax Act defines “contact information” in respect of a holder of a business number, means the name, address, telephone number, facsimile number, and preferred language of communication of the holder. When the CRA requests contact information of a business, consequently, the business needs to provide all of the above-noted information, in order to satisfy the documentation requirements.

If you are facing CRA tax audits and you are uncertain about required supporting documentation, you should engage with one of our expert tax lawyers in Toronto. Our professional Canadian tax lawyers can provide legal advice and assist you with fighting unreasonable CRA decisions.


Can The CRA Question The Morality And/or Ethics Of A Taxpayer?

No, the CRA should not and cannot question the morality or ethics of a taxpayer, unless such conducts are expressly regulated in legislations and regulations. For instance, when a taxpayer files an ITC claim, the CRA cannot deny the claim based on the conducts of the suppliers that are relevant to the taxpayer’s claim. However, if there is express language in the legislation forbidding certain conducts, then the CRA is permitted to act accordingly. As an example, subsection 152(4) allows the CRA to extend the normal reassessment period if the taxpayer or person filing the return has “made any misrepresentation that is attributable to neglect, carelessness, or wilful default…” The CRA can therefore act accordingly by reassessing a taxpayer beyond the normal reassessment period based on the taxpayer’s or the tax-filer’s conducts that equate to negligence, carelessness, or wilful default.

What Should I Do When CRA Audits My HST/GST Returns?

When you are under a CRA a tax audit, whether or not it is related to your HST/GST returns, we recommend that you consult with an experienced Canadian tax lawyer, who can help you understand your obligations and your rights. For example, if you are a director of a corporation, the CRA may be able to pursue director’s liability regarding owed HST/GST remittance. For individual taxpayers, it is important to know what stages of disputes will be involved in challenging the CRA’s decision, as well as other alternatives to request relief once the CRA’s decision is finalized.


This article just provides broad information. It is only up to date as of the posting date. It has not been updated and may be out of date. It does not give legal advice and should not be relied on. Every tax scenario is unique to its circumstances and will differ from the instances described in the article. If you have specific legal questions, you should seek the advice of a Canadian tax lawyer.