Group Relief Election: Canadian corporations
and partnerships that are members of the same closely related group
can, in certain circumstances, make an election under section 156
of the Excise Tax Act (Canada) (ETA) to treat certain
taxable supplies made between the members as being made for nil
consideration. As a result, transactions covered by the election
are not subject to the goods and services tax/harmonized sales tax
(GST/HST). In the past, the election form did not have to be filed
with the Canada Revenue Agency (CRA), but had to be maintained in
the parties' records for audit purposes. As a result of recent
amendments to the ETA, the election form for new elections that
take effect on or after January 1, 2015, and for previously-made
elections that remained in effect on that date, will have to be
filed with the CRA (or with Revenu Québec (RQ), in the case
of Québec-based registrants). If, prior to 2015, any
election form for a continuing election had been filed with the CRA
or RQ, the election will have to be re-filed using the new
prescribed form. The filing deadlines and other changes relating to
the election are discussed below.
Elections that become effective on or
after January 1, 2015 – The specified filing deadline is the
earliest date that any of the electing parties is required to file
a GST/HST return for the reporting period in which the election
becomes effective – i.e., February 28, 2015 should be the
earliest possible filing deadline.
Elections that became effective
before January 1, 2015 and remained in effect on that date –
These elections will not be effective for supplies made after 2014
unless they are filed (or re-filed) in the new prescribed form
after 2014. The specified filing deadline is December 31,
Under the amended election provision,
the CRA (or RQ, where applicable) has discretion to accept
New Prescribed Form: The election is now made
using CRA Form RC4616 entitled, "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." Form
RC4616 replaces Form GST25.
Consolidated Election: New CRA Form RC4616
permits a group of closely related entities making the election to
consolidate their election in a single form.
Joint and Several Liability: The amended
election provisions provide that parties to this group relief
election (or persons that conduct themselves as if such election
were in effect) are subject to a joint and several (or solidary)
liability provision with respect to the GST/HST liability that may
arise in relation to supplies made between the parties on or after
January 1, 2015.
Québec Sales Tax (QST) Election: A
similar group relief election exists under the QST legislation. The
February 20, 2014 Québec Budget announced that changes will
be made to the QST election rules to parallel the ETA changes.
Changes Regarding Newly-Established Members:
The recent amendments to the election provisions included changes
(generally applicable to supplies made after 2014) affecting the
eligibility of certain entities to make the election, particularly
in the case of newly-established members of the closely related
group. Relative to the pre-amended rules, the revised eligibility
conditions could be more difficult to meet in some cases, and less
restrictive in other cases.
Various Factors to Consider: In preparing new
elections, and before choosing to file pre-2015 elections to
maintain them in force, the following factors should be carefully
whether the various conditions for
the election are clearly met;
whether or not it remains beneficial
to have the election in place for all electing members;
whether transactions that occurred
after the chosen effective date of the election have been treated
in accordance with the election;
whether any of the special rules for
financial institutions apply; and
whether any changes to ownership
structures and supplies made by members of the group may affect the
group's ability to use the election.
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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