CRA releases a memorandum on the GST/HST closely related corporation rules

CRA has released a new memorandum on the rules regarding when corporations qualify as closely related for ETA purposes

Points covered include:

• CRA considers that a Canadian permanent establishment is not deemed by s. 132(2) to be a Canadian resident person for purposes of being potentially considered to be part of a closely related group of persons.
• Conversely (and at least somewhat contrary to the CIBC World Markets case, which is not mentioned), the closely-related status of a Canadian corporation can extend to the activities carried on by it through a foreign permanent establishment notwithstanding s. 132(3).
• Where a corporation (C) is owned equally by two unrelated corporations (A and B), s. 128(4) will deem a wholly-owned subsidiary (D) of C to not be closely related to C if A holds the voting rights (e.g., under a voting proxy arrangement?) to the shares held by C in D.

Neal Armstrong. Summaries of GST/HST Memorandum 14-7 Closely Related Corporations June 2023 under ETA s. 132(2), s. 132(3), s. 128(1)(a), s. 128(1.1), s. 128(1.1)(a)(i)(B), s. 128(4) and s. 128(2).