Canada’s Biggest Loyalty Points Company Facing Significant Tax Reassessment
March 1, 2019
written on behalf of Feigenbaum Law
A Canada Revenue Agency (CRA) audit of Montreal based Aimia Inc. (Aimia) has concluded. Aimia, which is responsible for customer loyalty programs worldwide, may now be facing a large tax bill.
Aimia – An Overview
Aimia Inc. which describes itself as a “global data-driven marketing and loyalty analytics company” providing “clients with the customer insights they need to make smarter business decisions” and also “partner[ing] with companies to help generate, collect and analyze customer data and build actionable insights.”
Over the last two years, Aimia has seen many changes at the executive level, including the departure of its former CEO, Rupert Duchesne, in January 2017 and former president and chief strategy officer, Nathaniel Felscher, in May 2018.
Aimia used to own the Aeroplan loyalty program prior to its sale to a consortium of organizations led by Air Canada earlier this year. The other members of the consortium include CIBC and TD, the two banks which offer Aeroplan credit cards, as well as Visa Canada Corp.
After Aimia’s rejection of its initial offer of $250 million in cash as well as the assumption of reward point liability, the consortium increased its offer to $450 million in cash. After many months of negotiations, the sale was ultimately approved by Aimia shareholders in January 2019, providing Aimia with an influx of more than $1 billion in cash, according to the company’s largest stakeholder.
Aimia currently still owns and operates Air Miles Middle East and has stakes in various other loyalty programs worldwide, including loyalty programs of airlines such as Aeromexico and AirAsia.
Final Letter Received from CRA
Once the audit was concluded, Aimia received a “Final letter for the 2012 and 2013 taxation years” from the CRA. A notice of re-assessment is expected to be forthcoming, with the assessed amount anticipated to be approximately $30 million, plus interest of up to $5 million.
Aimia plans to use a $100 million restricted cash account that was set up as part of the Aeroplan sale in order to pay the money owing to the CRA. Aimia also plans to “vigorously contest the case”.
Contesting a Reassessment
Where they object with a CRA notice of assessment or reassessment, including the amount of tax, interest or penalties assessed as owing, taxpayers (including corporations) have the right to make a formal objection.
Taxpayers have 90 days from the date of the notice of assessment or reassessment to file a notice of objection.
For large corporations (specifically defined as those having more than $10 million in total taxable capital in Canada at the end of the relevant tax year), the notice of objection must:
- reasonably describe the reasons for the objection;
- reasonably describe any and all relevant facts;
- reasonably describe the reasoning relied upon; and
- specify the relief the corporation is seeking.
Once the CRA receives the corporation’s objection, an appeals officer will review the assessment or reassessment in dispute and contact the corporation (or its lawyer) to attempt to resolve the dispute. If the issue is not resolved at that stage, the corporation can further appeal to the Tax Court of Canada.
While the dispute is ongoing, the corporation that is disputing an assessed or reassessed amount must pay 50% of that amount as well as the full amount of taxes not in dispute.
It remains to be seen what the outcome of this dispute will be. We will continue to monitor developments in this matter as they unfold and will provide updates as they become available. In the meantime, If you have questions about tax audits, or compliance with your tax obligations contact Mark Feigenbaum for a custom solution to your corporate tax needs. We work with you to create a bespoke solution that will streamline your compliance requirements.
How Can Feigenbaum Law Help?
At Feigenbaum Law, our goal is to create the best possible personal or corporate and cross-border tax strategy for each of our clients. Accountants and lawyers in both the U.S. and Canada routinely seek us out for assistance with complicated tax compliance issues. Our unparalleled knowledge of tax regimes in various jurisdictions makes us leaders in this field. Contact us to learn more about how we can help or call us at (416) 777-8433 or toll free at (877) 275-4792
