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: 165076
Dear [Client]:
Subject: GST/HST INTERPRETATION
Changes to the GST/HST Election for Nil Consideration
Thank you for the letter […], concerning amendments to the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) “Election for Nil Consideration” effective January 1, 2015.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
INTERPRETATION REQUESTED
[You asked a number of operational questions about the] […] amendments made to section 156: […]
INTERPRETATION GIVEN
At any time after 2014, where a person that is 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. Effective January 1, 2015, an election or revocation of an election must be made by completing and filing 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. Whether the Government will reconsider the filing requirement for the Form RC4616 is a matter of tax policy, which is the responsibility of the Department of Finance. […].
[…]
[…] The election under section 156 must be made jointly by a person that is a specified member of a qualifying group and another specified member of the same group and filed with the CRA. A specified member of a qualifying group means, inter alia, a qualifying member of the group. Pursuant to subparagraph (c)(iii) of the definition of “qualifying member” under subsection 156(1), a registrant that has no property (other than financial instruments and property of a nominal value) and that has not made taxable supplies may be a qualifying member, provided certain conditions exist such as an expectation that the registrant will be making supplies throughout the following twelve months (i.e., twelve months from the effective date of the election) and that all or substantially all of those supplies will be taxable supplies. This may be reviewed during the course of an audit. The CRA would generally review available documentation such as business plans or input tax credit claims and the activities undertaken by the registrant to make taxable supplies, such as research and marketing that support the expectation that the registrant will be making taxable supplies throughout the twelve months.
Whether an election made under those circumstances would remain in effect where taxable supplies have not been made depends on the particular circumstances, for example, whether the registrant has since acquired property other than financial instruments or property having other than nominal value. Where a registrant meeting the conditions of subparagraph (c)(iii) of the definition of “qualifying member” makes an election and subsequently acquires certain property for consumption, use or supply exclusively in its commercial activities, the registrant may now meet the conditions of subparagraph (c)(i). Provided the registrant had not ceased to be a qualifying member prior to the acquisition of the property, the election would remain in effect. Note that an election ceases to have effect in certain situations, one of which is when the registrant ceases to be a specified member of the qualifying group. For example, where subparagraphs (c)(i) and (c)(ii) do not apply, a registrant would cease to be a specified member of the qualifying group where the registrant would no longer have a reasonable expectation of making taxable supplies.
[…] While an election (or revocation of an election) is between two members, the Form RC4616 and electronic filing (additional information provided below) will permit multiple elections and revocations to be filed together. Every combination of eligible corporation and eligible Canadian partnership, among the names included, will be considered to have made the election (or to have revoked the election) with respect to supplies made between them. While there is no legislative requirement as to which specified member should file the Form RC4616, the Form RC4616 and electronic filing is designed such that the 1st specified member identified in Part A of the form would be the specified member filing the form. It should be noted that there is a requirement as to when the Form RC4616 is to be filed. To make an election (or revocation), the Form RC4616 must be filed on or before the day on which the GST/HST return for the reporting period that includes the effective date of the election (or revocation) is required to be filed. The Form RC4616 is to be filed by the earliest date that a GST/HST return is due from the specified members who intend to make the election (or revocation).
[…] There is no legislative requirement as to which specified member should file a Form RC4616 to revoke a previously made election. The Form RC4616 and electronic filing permit multiple revocations to be filed together. Both the Form RC4616 and electronic filing is designed such that the 1st specified member identified in Part A of the form would be the specified member filing the form.
[…] Where a specified member of a qualifying group has an election with another specified member of the group in effect before 2015 that is still in effect on January 1, 2015, and they are jointly electing to continue to use the election (when all of the eligibility requirements continue to be met), the Form RC4616 must be filed after 2014 and before January 1, 2016. In this case, the election remains the original election and, as a result, the effective date specified on the Form RC4616 should be the original effective date of the election. A current duly authorized individual may sign and file the Form RC4616. With respect to election forms filed prior to 1992, subsection 156(2.01) states that an election filed before January 1, 2015 is deemed never to have been filed.
[…] The electronic filing of the election (or revocation of an election) is expected to be available through My Business Account in April 2015. Until electronic filing is available, the election must be made using the paper format. The paper format will remain available for registrants who do not file electronically.
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 […] Marcel Boivin, Director, Financial Institutions and Real Property at 613-952-9248.
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