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Tax Alert


Lisa Garland on December 8, 2015 in Advice for Business Owners

The federal government introduced changes regarding the GST/HST “Closely related election” which impose a filing deadline of December 31, 2015. This election allows certain closely related corporations and partnerships that are registrants engaged exclusively in commercial activities and that are members of a qualifying group, to not charge GST/HST on taxable supplies made to group members.



This election allows cash flow relief where one member of a qualifying group provides goods or services, such as leases of real property, leases of equipment, leases of vehicles or the provision of management and other services, to another member of the group. For example, both ParentCo and wholly-owned SubCo are both registered for GST/HST. They engage exclusively in commercial activities and SubCo leases its building to ParentCo. With the election in place, no GST/HST has to be collected and remitted with respect to lease payments.



Previously, if the two electing members wanted to remove the GST/HST on the intercompany transactions, they would complete the GST25 election form but not file it with the Canada Revenue Agency (“CRA”). For elections in place before 2015 that were still in effect as of January 1, 2015, new election form (RC4616) must be filed after 2014, but no later than December 31, 2015. It can be mailed or filed online using CRA’s My Business Account.



Note: With the new rules in place as of January 1, 2015, for new elections made after 2014, qualifying members must file the new election form no later than the earliest of the day one of the members is required to file a GST/HST return for the reporting period that includes the day on which the election becomes effective.



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