by  and  of Torys LLP

The election under section 156 the Excise Tax Act (Canada) permits Canadian corporations and Canadian partnerships that are registrants engaged exclusively in commercial activities and that are members of the same qualifying group to jointly elect to treat taxable supplies (subject to certain exceptions) between them as having been made for no consideration. This generally allows intercompany supplies of property and services (subject to certain exceptions) between the parties to the election to be made without collecting GST/HST. Prior to 2015, the election was not required to be filed and the parties simply retained the election in prescribed form in their books and records. However, legislative amendments effective January 1, 2015 provide for a new regime that now requires the election to be filed with the Canada Revenue Agency (CRA) rather than simply kept on file.

What You Need To Know

  • Elections with Effective Date Prior to 2015: An election with an effective date prior to 2015 must be filed with the CRA by the fast-approaching deadline of December 31, 2015 to remain valid for supplies made in 2015 and future years. The election must be completed and filed using Form RC4616 (which replaces the previous Form GST25) and the original effective date should be indicated on the form. For greater certainty, even if Form GST25 was filed prior to January 1, 2015 this will not alleviate the need to file Form RC4616.
    • CRA announced a simplified method that permits specified members of a qualifying group that have existing elections, each with a different effective date that is prior to January 1, 2015, to file only one Form RC4616 identifying December 31, 2014 as the effective date (covering all members instead of each filing separately). If this simplified method is chosen, the parties should retain each Form GST25 that was originally completed in their books and records as this may be required for audit purposes relating to supplies made on or after the original effective date and before December 31, 2014.
  • Elections with Effective Date After 2014: An election with an effective date after 2014 must be made using Form RC4616 and must be filed with CRA by the earliest date on which any member of the qualifying group making the election is required to file a GST/HST return for the reporting period that includes the effective date of the election.