Is a sale of my company’s shares subject to GST/HST?

A sale of the shares of your company is different from a sale of the business’s assets, and the Excise Tax Act treats them under different provisions. This page covers federal law only.

A share is a financial instrument

Section 123(1) defines an equity security as a share of the capital stock of a corporation or any interest in or right to such a share. It defines a financial instrument to include an equity security.

The financial service definition

A financial service, as defined in s.123(1), includes the transfer of ownership of a financial instrument. That is subject to the exclusions in the definition, which come after the words “but does not include”. An exclusion is the payment or receipt of money as consideration for the supply of property other than a financial instrument or a service other than a financial service. Another is a professional service provided by an accountant, actuary, lawyer or notary in the course of a professional practice.

Exempt supplies

Section 123(1) defines an exempt supply as a supply included in Schedule V. Part VII of Schedule V lists a supply of a financial service that is not included in Part IX of Schedule VI. Schedule VI is headed “Zero-Rated Supplies”. Whether a particular share sale falls in an exclusion or in Part IX of Schedule VI is a question for your accountant.

How an asset sale differs

Section 167(1) applies where a supplier supplies a business or part of a business and the recipient acquires ownership, possession or use of all or substantially all of the property reasonably regarded as necessary to carry it on. The supplier and recipient may jointly elect under s.167, except where the supplier is a registrant and the recipient is not. The CRA describes Form GST44 as the form to elect not to have GST/HST apply to the sale of a business or part of a business. A wider view is in tax when you sell a business in Canada.