Selected GST/HST Measures In 2014 Federal Budget

The 2014 Federal Budget (Budget) contained some significant GST/HST changes. Most importantly, it proposes changes to the election contained in section 156 of the Excise Tax Act (ETA), which allows closely related parties to make intercompany supplies on a GST/HST-free basis. These changes are described in further detail below and should be reviewed by all parties to existing and anticipated elections. Other changes of interest include an expansion of the joint venture election and additional powers for the Canada Revenue Agency (CRA) to register an entity for GST/HST purposes.

 SECTION 156 ELECTION

The section 156 election allows closely related parties to make intercompany supplies on a GST/HST-free basis. Due to what was broadly viewed as a technical flaw in the ETA, the election was not available to a new entity that had no property and had not yet made any taxable supplies. Often, for example, in the context of an internal reorganization, a new entity will be