The nil consideration election found in section 156 of the
Excise Tax Act (ETA), sometimes referred to as the related
party election, has recently been updated with changes to be in
effect January 1, 2015. For those of you not familiar with this
election, it allows members of a closely related group to treat
certain taxable supplies between them as having been made for no
consideration. Essentially, this eliminates the need to collect and
remit taxes by one member and then claim an input tax credit by the
other member, which can sometimes result in cash flow issues,
especially with large transactions and differing reporting
periods.
Currently, when members qualify for the election they are
required to complete a prescribed form, GST25 "Closely Related
Corporations and Canadian Partnerships," and retain a copy of
that form with their books and records. The Canada Revenue Agency
(CRA) does not currently require that members file this form.
