GST-QST: New election between closely related parties

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Section 156 of the Excise Tax Act (ETA) provides  an election allowing closely related corporations to make certain taxable intercompany supplies for nil consideration, under certain conditions. Among other requirements, corporations supply must be exclusively in taxable activities and be closely related within the meaning of section 128 of the ETA (i.e. ownership of not less than 90% of the value and number of another corporation’s  shares that have full voting rights).

This election allows closely related corporations to not account for the GST/HST that would otherwise be fully recoverable in respect of these supplies. The election cannot include other parties, such as individuals or trusts. A similar election applies to the QST.

2016 Budget 

The 2016 federal budget proposed to introduce a new voting control requirement. In addition to owning at least 90% of the voting shares of a subsidiary corporation, a corporation must control, directly or indirectly, 90% or more of the votes in respect of every corporate matter of the subsidiary corporation (with limited exceptions).

This measure has been in effect since March 23, 2016 for all elections filed as of that date. For elections in effect on or before Budget Day, the measure will apply as of the day that is one year after Budget Day.


Effective January 1, 2015, corporations that wish to make such an election must file form FP 4616 V to Revenu Québec through the first electing party that must file its income tax return.

Late-filed elections

The Canada Revenue Agency announced guidelines for the late filing of the election form in its July 2016 policy statement P 255, Late-filed Section 156 Elections and Revocations

Benoit Vallée, CPA, CGA
Senior Manager, Indirect Taxes
Demers Beaulne
Member of the taxation and commodity taxes technical working group