Reminder – Election for closely related parties for 2015: Some have until December 31, 2015 to act

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The Excise Tax Act and the Act respecting the Québec sales tax provide for an election allowing closely related corporations and partnerships to not charge sales tax (GST-QST) on certain taxable transactions made between them when certain conditions are met. The purpose of this election is to provide cash flow relief for entities within a qualifying group. 

Since 2015, entities must file the new election form (FP-4616) with the tax authorities rather than just keeping it in their records. This form replaces the previous form FP-2025.

Note that when an election is made for the first time in 2015 or involves new members, the election form must be filed with the tax authorities by the first date on which one of the entities is required to file a GST/QST return for which the election becomes effective. Therefore, entities that have not yet met this requirement are late in their election filing.

In addition, corporations that made the election before 2015 and that continue to apply it in 2015 must file the new election form FP-4616 by December 31, 2015. Otherwise, the election will be deemed never to have been filed.

If you have not already done so, you should review your clients’ organizational structures to determine if elections between closely related parties have been made correctly during the year, if they are late and whether you still have until December 31, 2015 to comply. The countdown to January 1, 2016 is on.

Gérard Durocher, CPA, CA
Senior Manager – Taxation and Commodity Taxes
Raymond Chabot Grant Thornton

Member of the Technical working group on taxation and commodity taxes of the Quebec CPA Order