Section 155

Administrative Policy

GST Memorandum 300-7 "Value of Supply" under "Non-Arm's Length Supplies"

General synopsis

21. Section 155 of the Act provides that where a supply of property or a service is made, between persons not dealing with each other at arm's length for consideration that is less than the fair market value of the property or service at the time the supply is made or for no consideration and the recipient of the supply is not a registrant who is acquiring the property or service for consumption, use or supply exclusively in the course of commercial activities, then:

(a) if no consideration is paid for the supply, the supply is deemed to be made for consideration, equal to the fair market value of the property or service at that time; and

(b) if consideration is paid for the supply, the value of the consideration is deemed to be equal to the fair market value of the property or service at that time.

22. The above rule does not apply where the recipient of the supply is a registrant who is acquiring the property or service for use, consumption, or supply exclusively in the course of the registrant's commercial activities.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 153 - Subsection 153(2) 146

Subsection 155(2)

Administrative Policy

28 February 2019 CBA Roundtable, Q.3

CRA no longer provides an administrative concession limiting the application of s. 155(1)

CRA reportedly indicated in 1991 that, as an administrative concession, it would not apply s. 155(1) to transactions between corporations without share capital that form part of a national religious organization. See Taitz & Millar, ‘‘The GST and National Religious Organizations – Selected Issues”, GST & Commodity Tax (Carswell), Vol. V, No. 3, pp. 21-23 (April 1991), at p. 22., which states in respect of “Intercorporate Transactions” (in part):

… [A]s an administrative concession, Revenue Canada stated that it would not apply the anti-avoidance rule in section 155 to any of the transactions between the various corporations, in order that the transactions could be completed for nil or nominal consideration. This rule would normally apply as the corporations would not be considered to be dealing at arm’s length and the recipient may not be a registrant using the goods exclusively in commercial activity. Alternatively, the Department indicated that if the transactions were carried out at no greater than the “direct cost” to the vendor (as defined in Schedule V, Part VI), GST would not be applicable.

CRA indicated that it “has no administrative concession in place that limits the application of subsection 155(1),” and noted that after 1991, s. 155(2) was enacted, which now provides a detailed code for exceptions to the application of s. 155(1), so that:

For example, if a charity were to make a non-arm’s length supply of real property for no consideration that was exempt by way of section 5 of Part V.I of Schedule V to the ETA, subsection 155(1) would not apply to deem the supply to be made for consideration equal to the fair market value of the property.