What is the purpose of Election 167?
Where certain conditions are met, the vendor and the purchaser may choose to make a joint election under Section 167 of the Excise Tax Act (ETA). This will allow the purchaser to acquire a business with no GST/HST payable under the agreement.
What are the conditions to qualify for Election 167?
No GST/HST is collectible in respect of the assets on the sale of a business, provided that the following conditions are met:
- The business or part of the business being sold was established or carried on by the supplier or was established or carried on by another person and acquired by the supplier.
- The recipient is acquiring ownerships, use, or possession of all or substantially all the property that is regarded as necessary for the recipient to be capable of carrying on the business or part as a business. This means that at least 90% of the business’s supplies are being purchased.
- The recipient (purchaser) is a registrant.
How do I file for the GST/HST exemption under 167?
The supplier (vendor) and recipient (purchaser) complete the prescribed election form, and the recipient then must file the forms with the CRA. The form can be filed electronically by a tax preparer or can be submitted to the taxpayer’s local tax filing centre. The GST44 form must be filed by the purchaser together with his GST/HST return for the reporting period in which the acquisition was made.
When must the GST44 form for filing election 167 be filed?
The GST44 form must be filed by the purchaser together with his GST/HST return for the reporting period in which the acquisition was made.
The reporting period can be monthly, quarterly or annually so be sure to consult with your accountant regarding the reporting period. If the reporting period is monthly, the filing obligation could be triggered fairly quickly after closing.
