CRA, changing its mind, concludes that two Canadian sisters can be closely related for GST/HST purposes through multiple stacked NR corporations above them

When it previously looked at this question, CRA considered that a “qualifying subsidiary” includes a child or grandchild but not a great-grandchild. As a result, it concluded that sufficient stacking of corporations can result in an inability of all group members to make the ETA s. 156 nil consideration election. For example if, in a wholly-owned group, there are two stacks of four corporations beneath a common non-resident Holdco, the two "grandchild" Canadian-resident corporations, but not the two" bottom" Canadian-resident great-grandchild corporations, would be able to elect with each other, as they are too remote from the Holdco to be closely related to each other.

CRA has now revisited the same question and concluded that the “qualifying subsidiary’ definition can be applied iteratively so that, in the above example, the two bottom Canadian corporations would be closely related to each other. It also confirmed that it does not matter that their relationship is through non-resident parent corporations.

Neal Armstrong. Summary of 12 February 2018 interpretation 167422R under ETA s. 156(1) – qualifying group.