5 May 2003 GST/HST Interpretation 44015 - Sale of [with Respect to the Share Purchase Agreements]

We have reviewed your request submitted to our office XXXXX and would like to provide you with the following comments regarding the treatment of GST/HST for these transactions.

Statement of Facts

Based on the information contained in the e-mails and the additional documentation which was provided our understanding of the facts and the transactions is as follows:

1. XXXXX all of the issued and outstanding shares XXXXX were acquired by XXXXX from XXXXX pursuant to a Share Purchase Agreement. XXXXX.

2. XXXXX XXXXX agreed to transfer the employees, assets, assumed liabilities and rights and obligations of XXXXX and XXXXX associated with the XXXXX and associated business activities to XXXXX.

3. XXXXX is the successor to XXXXX.

4. XXXXX two GST-44 forms were completed; the recipient was XXXXX and the suppliers were XXXXX and XXXXX.

5. XXXXX all of the issued and outstanding shares of XXXXX were acquired by XXXXX from XXXXX pursuant to a Share Purchase Agreement. XXXXX.

6. XXXXX XXXXX agreed to transfer the employees, assets, assumed liabilities and rights and obligations of XXXXX and XXXXX associated with the XXXXX and associated business activities to XXXXX. XXXXX.

7. XXXXX is the successor to XXXXX.

8. XXXXX two GST-44 forms were completed; the recipient was XXXXX and the suppliers were XXXXX and XXXXX.

Request

You requested our comments on the eligibility of an election under section 167 of the ETA for the sale of XXXXX with respect to the Share Purchase Agreements and the XXXXX.

Comments

Based on the facts set out above, the purchase of the issued and outstanding shares of XXXXX and XXXXX is a financial service. The sale and purchase of a financial instrument falls under paragraph (d) of the definition of financial service and is therefore an exempt supply.

Our review of these facts raised some other concerns, which we would like to bring to your attention:

1. In order to qualify for an election under section 167, the recipient must be a registrant if the supplier is a registrant. From the information we received it is not clear whether either XXXXX or XXXXX could register voluntarily per section 240 since, it is our understanding that both companies were dissolved after XXXXX acquired their issued and outstanding shares, therefore they may not have engaged in commercial activities. If you have any additional information, which would entitle these two companies to register, refer to point 2 below for additional concerns.

2. To be eligible to make an election under section 167 each supplier must be making a supply of a business or part of a business and under the agreement for the supply the recipient must be acquiring from each supplier the ownership, possession, or use of all or substantially all of the property that can reasonably be regarded as necessary for the recipient to be capable of carrying on the business or part thereof. In the case of the supply of a business or part of a business between the XXXXX, XXXXX and XXXXX, two GST-44 forms were completed. If legally there are two separate entities making supplies to the recipient then a separate calculation must be done for each supplier. It was not clear from the information received whether the calculation was done separately for each supplier. The same concern arises for the transactions between XXXXX, XXXXX and XXXXX.

We thank you for bringing this matter to our attention and hope our comments will be of assistance to you. Should you have any questions regarding the information above, please contact me at (613) 957-8221.