Closely related Canadian corporations and partnerships often use
an election under section 156 of the Excise Tax Act
(Canada) to manage GST/HST on intercompany supplies of services and
property (other than real property). The effect of the election is
to deem every taxable supply between the electing parties to have
been made for no consideration, resulting in no GST/HST payable.
Until recently, the election was not required to be filed with the
Canada Revenue Agency (CRA). Rather, the parties retained the
election on file in case of audit to support the non-collection of
Recent amendments to the Excise Tax Act (Canada), which
received royal assent on June 19, 2014, require any section 156
elections executed on or after January 1, 2015, to be filed with
the CRA by the earliest date on which any of the electing parties
is required to file a return for the period that includes the day
on which the election becomes effective.
Furthermore, the amendments also require all previously
executed section 156 elections to be filed sometime between January
1, 2015 and December 31, 2015. The CRA indicated in Excise and
GST/HST News No. 91 (2014) that a new election form, Form
RC4616, will replace the current election form (Form GST25). The
new form will be called "Election or Revocation of an Election
for Closely Related Corporations and/or Canadian Partnerships to
Treat Certain Taxable Supplies as Having Been Made for Nil
Consideration for GST/HST Purposes." The CRA will make the new
form available in January 2015.
The new filing requirement will provide the CRA with unsolicited
information regarding entities that are, and have historically
been, treating their intercompany supplies as not subject to
GST/HST. Before filing the new election forms with the CRA to
continue to avail themselves of the benefits of the section 156
elections, companies should ensure that the conditions for using
the election continue to be met and historical transactions within
the related group have been treated correctly.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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