GST/HST & Asset Sales: The Section 167 Election

Introduction

The goods and services tax ("GST") is a value-added tax charged on most supplies made in Canada of goods, services, real property and intangible property.  The GST is charged at a rate of 5% on the value of the consideration for a taxable supply.  The harmonized sales tax ("HST") is basically the GST charged at a higher rate.  It applies to taxable supplies made in participating provinces.  The participating provinces use the HST in lieu of implementing their own provincial sales tax schemes.  The HST ranges from 13% to 15% depending on the participating province.

Property sold through the asset sale of a business will generally be subject to GST/HST because personal property used in a commercial activity is deemed to be a taxable supply when sold or leased.  Commercial real property is also a taxable supply when sold or leased.