Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 167061
Dear [Client]:
Subject: GST/HST INTERPRETATION
GST/HST Election for Nil Consideration
This is in reply to the letter of […], concerning the amendments to section 156 of the Excise Tax Act (the ETA) and the election Form RC4616: Election or Revocation of an Election for Closely Related Corporations and/or Canadian Partnerships to Treat Certain Taxable Supplies as Having Been Made for Nil Consideration for GST/HST Purposes (formerly Form GST25).
All legislative references are to the ETA unless otherwise specified. As you may know, the amendments to section 156 are effective January 1, 2015, and Form RC4616 is available on the website of the Canada Revenue Agency (CRA).
INTERPRETATION REQUESTED
[You asked a number of operational questions about Form RC4616 and the amendments to section 156.]
[…]
INTERPRETATION GIVEN
At any time after 2014, where a person that satisfies the requirements set out in section 156 for being a specified member of a qualifying group files an election made jointly with another specified member of the group, every taxable supply, with certain exceptions, made between those two members at a time when the election is in effect is deemed to have been made for no consideration. As a result, there is no GST/HST payable in respect of these taxable supplies while this joint election is in effect.
Effective January 1, 2015, an election or revocation of an election must be made jointly by parties to the election or revocation by completing and filing Form RC4616 and specifying the day on which the election or revocation of the election becomes effective. While an election or revocation of an election is between two members, the Form RC4616 permits multiple elections and revocations. Every combination of eligible members whose names appear on the form (and on any attached page) are considered to have made or revoked an election effective on the date specified on the form.
[…]
[Each] specified member of a qualifying group that is party to existing elections made before January 1, 2015, each with a different effective date, cannot indicate its own individual effective date(s) on a Form RC4616. Although, the election remains the original election with the original effective date, the following simplified procedures have been developed for the filing of existing elections.
Specified members of a qualifying group that are party to existing elections, each with a different effective date that is before January 1, 2015, can file one Form RC4616 and indicate December 31, 2014 as the effective date. However, the Form GST25 that was completed when each election was made should be kept with the electing members’ books and records and reflect the original date the election was made. The common effective date of December 31, 2014, specified on the Form RC4616 would be recorded in CRA’s systems.
Alternatively, specified members of a qualifying group that are party to existing elections, each with a different effective date that is before January 1, 2015, could file a separate Form RC4616 for each (original) effective date, and in this case, the different effective dates would be recorded in CRA’s systems. In either of the above cases, the Form RC4616 must be completed and filed with CRA after 2014 and before January 1, 2016.
[…]
[The following] describes a scenario involving three elections that are in effect:
i. an election made between Parent Co and Subco A with an effective date of January 1, 2013;
ii. an election made between Parent Co and Subco B with an effective date of January 1, 2013; and
iii. an election made between Subco A and Subco B with an effective date of June 30, 2013.
In this scenario, Parent Co, Subco A and Subco B could file a single Form RC4616 under the simplified procedures discussed above and indicate December 31, 2014, as the effective date for the election which would be recorded in CRA’s systems as the common effective date. Alternatively, since the electing members have existing elections with different effective dates, three election forms could be filed as follows to ensure that the different effective dates are recorded in CRA’s systems:
* Form RC4616 would be filed for the election between Parent Co and Subco A specifying the original effective date of January 1, 2013;
* Form RC4616 would be filed for the election between Parent Co and Subco B specifying the original effective date of January 1, 2013; and
* Form RC4616 would be filed for the election between Subco A and Subco B specifying the original effective date of June 30, 2013 for their election.
[…]
[Under] the simplified procedures, specified members of a qualifying group that are party to existing elections with various effective dates that are before January 1, 2015, which are still in effect on that date, may complete one Form RC4616 and file it with the CRA after 2014 and before January 1, 2016 specifying December 31, 2014, as the effective date of the election. The Form GST25 that was completed when each election was made should be kept with the electing members’ books and records and reflect the original date the election was made.
[…]
CRA auditors will consider a duly completed Form GST25 for all supplies made prior to January 1, 2015. The changes to section 156 apply to supplies made after 2014. Prior to these changes, the Form GST25 was to be retained with the electing members’ books and records for audit purposes. The Form GST25 has no application to supplies made after 2014. Information provided on the Form RC4616 will be reviewed during the course of an audit.
[…]
In the case of a particular specified member of a qualifying group wishing to elect after 2014 with another specified member (or members) of that group with an election already in place, a new Form RC4616 must be filed listing in Part A of the form (and on any attached page) the particular specified member and all other specified members that are party to an election with the particular specified member; the effective date of the election should be specified in Part B. The effective date of any existing election previously made between the other specified members of the qualifying group (i.e., not made with the particular specified member) is not affected.
[…]
Pursuant to subsection 156(3), an election made jointly by a member of a qualifying group and another member of the group listed on a Form RC4616 ceases to be in effect on the earliest of the day on which either member no longer qualifies for the election (i.e., no longer is a specified member of the qualifying group) and the day on which the election is revoked by either member. Thus, in the event that a particular specified member of a qualifying group no longer meets the qualifications of the election, an election made with that particular member is no longer in effect. Any elections made between other specified members listed on that form (i.e., not made with the particular member) would not be affected. There is no requirement to advise the CRA or modify a previously filed Form RC4616 where a person no longer qualifies to be a specified member of a qualifying group.
[…]
Form RC4616 permits the first specified member to file the election on behalf of the specified members identified in Part A (and on any attached page). Only the signature of the first specified member is required on the Form RC4616 certifying that the member is authorized to file the election on behalf the specified members listed in Part A and on any attached page.
[…]
The specified members of a qualifying group making elections on Form RC4616 may authorize any one of the specified members of the group to file the Form RC4616 on their behalf. The form is designed such that it only requires the signature of the first specified member (i.e., the specified member that is authorized to file on behalf of the other specified members listed in Part A and on any attached page).
[…]
As noted above, the first specified member identified in Part A on the paper Form RC4616 may file the form on behalf of all specified members wanting to make or to revoke an election. That is, where there are more than two specified members of a qualifying group making an election or revocation of an election, only one Form RC4616 is required where all of the pair combinations of specified members whose names are listed in Part A (and on any attached page) are making the election or revocation. The common effective date would be specified in Part B of the form.
[…]
As mentioned earlier, effective January 1, 2015, every supply (with certain exceptions) made between a particular specified member of a qualifying group and another specified member of that group who have made an election under section 156 by filing Form RC4616 with CRA will be relieved of GST/HST while the election is in effect.
If the same members of the qualifying group also want similar relief from the Quebec Sales Tax (QST), they would be required to elect under section 334 of the Act Respecting the Quebec Sales Tax, by filing with Revenu Québec (provided they are not selected listed financial institutions) the Form FP-4616, Election or Revocation of an Election to Have Certain Taxable Supplies Made Between Specified Members Deemed Made for No Consideration.
[…]
Information filed with CRA on Form RC4616 will be uploaded to each registrant’s account by the CRA. Please note that work is underway to permit the electronic filing of the election or revocation of an election with the CRA. This is expected to be available through My Business Account (MyBA) in mid April 2015. Once electronic filing is available, registrants will be able to view, through MyBA, section 156 elections that they have filed, either electronically or by using the paper Form RC4616, as well as those filed by another specified member on their behalf.
[…]
[Once] a section 156 election has been filed either electronically or on paper, the election can be modified through MyBA. In the case of a particular specified member of a qualifying group wishing to elect with another specified member (or members) of that group after 2014, the response provided to question 1.e applies whether the election was filed electronically using MyBA or the paper Form RC4616.
In the event that a particular specified member of a qualifying group wishes to revoke an existing election that had been made with another specified member (or members) of the group listed in Part A of the election form (and on any attached page), any previously made election between the other specified members (i.e., not made with the member wishing to revoke the election) would not be affected by the revocation with the particular specified member. This is in accordance with the rules in section 156 which set out that an election or revocation of an election is between two persons.
However, care must be taken in filing the revocation to ensure that the elections between the other specified members remain in effect. Every pair combination of members whose names appear in Part A of the Form RC4616 (and on any attached page) would be considered to have revoked their election. Consider the following example […] using MyBA or the paper Form RC4616:
i. an election is made between Parent Co and Subco 1;
ii. an election is made between Parent Co and Subco 2; and
iii. an election is made between Subco 1 and Subco 2.
Parent Co wishes to revoke both (i) the election made with Subco 1 and (ii) the election it made with Subco 2; however, Subco 1 and Subco 2 do not wish to revoke the election made between them. Since every pair combination of members whose names appear on the form (and on any attached page) would be considered to have revoked their election, two separate Forms RC4616 should be filed either electronically or on paper:
i. a revocation of the election between Parent Co and Subco 1; and
ii. a revocation of the election between Parent Co and Subco 2.
A single Form RC4616 listing Parent Co, Subco 1 and Subco 2 in Part A would indicate (erroneously) that Subco 1 and Subco 2 had revoked the election between them.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4,Excise and GST/HST Rulings and Interpretations Service, the interpretations given in this letter, including any additional information are not rulings and do not bind the CRA with respect to a particular situation. Future changes to the ETA, regulations, or the CRA’s interpretative policy could affect the interpretations provided herein.
If you require clarification with respect to any of the issues discussed in this letter please call me directly at 613-952-9577.
Yours truly,
Susan Eastman
Special Provisions - FI Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate
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