The Department of Finance has proposed new "holding
corporation rules" for GST/HST* that, if enacted, would be
effective as of July 28, 2018. The following is intended solely to
provide an overview of the current and proposed new rules including
why these rules exist and how they apply.
What are the holding corporation rules?
In simple terms, the rules generally allow for a GST/HST
registered parent corporation ("Holdco") to claim input
tax credits ("ITCs") to recover GST/HST paid by Holdco
with respect to expenses that relate to another corporation
("Opco") that carries on GST/HST taxable activities.
Without these rules, a Holdco would generally not be able to
claim any ITCs given that such corporations commonly only own
shares of Opcos and/or other financial instruments, that generate
GST/HST exempt income (such as dividends and interest). To claim
ITCs, an essential requirement is that the property or service on
which GST/HST is payable must be acquired for
