Many groups of related corporations and/or partnerships rely on the election for closely related persons under section 156 of the Excise Tax Act (Canada) to allow the group to treat related party transactions as having been made for nil consideration. Based on this election, GST/HST does not have to be collected and remitted.
Since 1992, the prescribed form for this election, GST 25, had to be completed by the electing parties but did not have to be filed with the Canada Revenue Agency. This was intended to simplify compliance with the Excise Tax Act.
As a result of the 2014 federal budget, these elections must now be filed with the Canada Revenue Agency. If the election is in effect now, or comes into effect before 2015, the election must be filed after January 1, 2015 and before January 1, 2016. It cannot be filed before 2015.
If an election takes effect on or after January 1, 2015, the filing deadline is the earliest of the GST/HST filing deadlines of the parties making the election.
This is an important change and signals that the Canada Revenue Agency will take a closer look at transactions within corporate groups. Therefore, we recommend that companies prepare for 2015 by:
- Reviewing transactions within groups of related corporations and/or partnerships to determine if the election under section 156 of the Excise Tax Act is available; and
- Preparing to file elections in 2015: both elections that are currently in force and those that will be made in the future.
For further information about GST/HST and other corporate tax planning issues, please contact a member of our Tax Law team.