November 12, 2015, No. 2015-33. Businesses that have GST/HST and QST closely related group elections must ensure that they file all the required forms with the CRA and Revenue Quebec based on new rules introduced in 2014. Corporations and partnerships with elections that applied before January 1, 2015 that were still in place on that date but have not yet filed the election forms with the tax authorities have until December 31, 2015 to do so under a transitional measure. Before filing these forms with the CRA or Revenue Quebec, if applicable, businesses should ensure that they still meet all the conditions of the closely related elections and that they have properly completed the required forms. Corporations and partnerships that have undertaken reorganization transactions over the years, such as sales of shares, should take additional care to determine whether they still qualify to make the election.
Some businesses may be surprised to learn that, while they qualify to make the election for GST/HST purposes, some of the corporations and partnerships in their closely related group across Canada may not meet the election conditions for QST purposes. A careful review of the corporations and partnerships in your group will help you determine which entities are eligible to make the closely related group election, which inter-company transactions are eligible under the elections, and help you take measures to address potential errors.
The closely-related group election is one of the most popular GST/HST elections between businesses engaged in commercial activities. A corporation or a partnership that meets the conditions of a specified member of a qualifying closely related group may elect with another qualifying member of the same group to deem most transactions of property and services between the two electing members as having been made for nil consideration for GST/HST purposes. The election effectively removes the GST/HST on many intercompany transactions and can potentially improve cash flow. However, the election comes with strict conditions. Misunderstanding these conditions can create a significant risk of tax assessments for the parties. Similar rules apply for QST purposes.
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Information is current to November 11, 2015. The information contained in this TaxNewsFlash-Canada is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG’s National Tax Centre at 416.777.8500.