New Requirement To File Existing GST/HST Closely Related Party Elections Quickly Approaching

Closely related Canadian corporations and partnerships often use an election under section 156 of the Excise Tax Act (Canada) to manage GST/HST on intercompany supplies of services and property (other than real property). The effect of the election is to deem every taxable supply between the electing parties to have been made for no consideration, resulting in no GST/HST payable. Until recently, the election was not required to be filed with the Canada Revenue Agency (CRA). Rather, the parties retained the election on file in case of audit to support the non-collection of GST/HST.

Recent amendments to the Excise Tax Act (Canada), which received royal assent on June 19, 2014, require any section 156 elections executed on or after January 1, 2015, to be filed with the CRA by the earliest date on which any of the electing parties is required to file a return for the period that includes the day on which the election becomes effective.