Corporation A is assessed for its failure to have charged GST/HST on inter-corporate supplies of management services to Corporation B, which was owned by the same individual. If they thereafter amalgamate pursuant to s. 271, can Amalco claim the input tax credits that Corporation B would be entitled to, so that Amalco’s liability is reduced to only the interest and penalty? CRA responded:
In accordance with section 271, for the purposes of applying the GST/HST provisions in respect of property or a service acquired, imported or brought into a participating province by a predecessor, the new successor corporation is considered to be the same corporation as and a continuation of each of the predecessors.
Assuming that a predecessor met the conditions for claiming input tax credits (ITCs) (other than having the documentary evidence) in respect of tax that became payable or was paid without having become payable, and subsequently the documentation is obtained, the predecessor (or after amalgamation, the new successor) may claim that ITC in its net tax calculation for another reporting period, subject to the four or two year time limitation under subsection 225(4) of the ETA.
… Where the predecessor (the supplier) did not provide the documentary evidence to the other predecessor prior to the amalgamation, the new successor could provide the necessary documentation thereby allowing the new successor to claim the ITC effectively reducing their liability to any applicable interest and penalty.