What is section 156 of the Excise Tax Act?
S.156, under the Excise Tax Act, provides zero-rate on the transfer of assets within a closing related group, provided that certain conditions are met, effectively cancelling GST/HST.
What are the conditions to qualify for S.156?
The conditions that allow an entity to be eligible for s.156 require that the supply of goods is made between closely related corporations or partnerships or a combination thereof, where there is at least a 90% interest in the other corporation or partnership or at least 90% ownership of the other corporation’s or partnership’s shares. Other conditions require that both members are residents in Canada, both are GST/HST registrants and both are engaged exclusively in a commercial activity.
Does Section 156 apply to the sale of real property?
Section 156 does not apply to sale of real property, however, section 221 of the ETA provides relief if the purchaser is a registrant.
How do I file under S.156?
The election to file section 156 (1) must be made jointly by the qualifying group by completing form RC461 by the earliest date that a GST/HST return is due from the specified members who intend to make the election. Simply put, form RC461 is due on the earlier of the two corporations’ reporting period.
