Shares of Newco, which was incorporated solely for the purposes of purchasing all of the business assets of a supplier, are sold to a third party purchaser and Newco is immediately amalgamated with the purchaser after the asset transfer. In confirming that the s. 167 election would not be available for the business acquisition by Newco if Newco did not carry on a business before its amalgamation, CRA stated:
Under section 271, an Amalco is deemed for GST/HST purposes to be a separate person from each of its predecessors, except as otherwise provided under the ETA. … There is no provision deeming a predecessor (in this case, Newco) to acquire the characteristics of its successor Amalco. In other words, Newco's ability to register cannot be based on the proposed actions of a corporation, i.e., Amalco, that does not exist at the time Newco needs to be a registrant so it can make the section 167 election.
In confirming that a s. 167 election is not available to Amalco where an operating company ("Opco") is amalgamated with another corporation, and the amalgamated corporation (Amalco) immediately sells all of the assets, CRA stated:
One of the conditions for making an election under subsection 167(1) is for the supplier to be supplying a business or part of a business that was established or carried on by the supplier or that was established or carried on by another person and acquired by the supplier. Since a predecessor corporation (in this case, Opco) is the entity that established or carried on the business, the Amalco cannot be considered to have done so, since it is deemed to be a separate person for GST/HST purposes. Moreover, the Amalco did not acquire the business from its predecessor (Opco) since paragraph 271(c) deems the transfer of property from Opco to Amalco not to be a supply for GST/HST purposes.
