December 15, 2014
Please note that this article has been authored by our own Maura Timmons, CA
Currently certain related corporations are able to elect to have supplies made between them take place with no HST implications. The applicable election is for Closely Related Corporations and Partnerships and is called an “Election to Treat Certain Taxable Supplies as having been made for Nil Consideration.” Since 1992, corporations making this election have been able to fill out the required Canada Revenue Agency (CRA) form, GST-525, and simply keep it in their records, rather than actually filing it with CRA.
Effective for years after 2014, if two corporations want to make this election, they must file a new prescribed form, RC4616, with CRA. Corporations which have been parties to this election prior to 2014 have until the end of 2015 to submit this form to CRA. Corporations wanting to make a new joint election in 2015 or later years must submit the new form with CRA on or before the due date of their HST return for the reporting period in which the election is first used.
As of the date this article was written, CRA has not yet published the new RC4616 form. If it is still not published by January 1, 2015, corporations entering into a new joint election must file a GST-525 form with CRA and once the new form is published, they must submit a copy of the new form as well. Presumably CRA recognizes the administrative burden this will place on taxpayers and will publish the new election form prior to January 1, 2015.
Corporations who are already party to a joint election should not file the election form with CRA until the new RC4616 form is published as they have until December 31, 2015 to file the form with CRA.
It should be noted that certain corporate groups could be required to file multiple election forms if supplies are made between many corporations. CRA has not indicated if the new prescribed form will include space to list various corporations within one corporate group or not.
Parent corporation has owned a building which has been rented to Subsidiary corporation (wholly owned by Parent) since 2005. Parent and Subsidiary signed a GST-525 joint election form in 2005 and kept a copy in their files. Parent has not charged HST to Subsidiary on the rent since 2005. Prior to the end of 2015, Parent and Subsidiary must file a new joint election form, RC4616, with Canada Revenue Agency in order to continue having the supply of rent between them take place with no HST implications. If the form is not filed by December 31st, 2015, the corporations run the risk that CRA could deny the effectiveness of their joint election since its inception in 2005, and request that HST be paid on the rent since 2005.
The determination of whether corporations are able to use the joint election can be complicated. WBLI tax advisors are available to assist in making this determination, as well as assisting in the preparation and filing of the joint election forms. Please contact us for further information.