Section 156 election (closely related supplies)

Owners of related companies meet this election when one company supplies property or services to another in the group, and buyers meet it when reviewing a target’s intercompany arrangements. The CRA’s GST/HST Memorandum 14-5 explains that the election is made by specified members of a qualifying group. Under subsection 156(1) as it now reads, a qualifying member must be a registrant that is a corporation resident in Canada or a specified partnership each member of which is resident in Canada; the memorandum still uses the older term “Canadian partnership”. See how to check HST compliance when buying a business.

Limits and mechanics

• Subsection 156(2.1) excludes sales of real property, supplies the recipient does not acquire exclusively for its commercial activities, and certain supplies to a temporary member
• The election and any revocation are made jointly in prescribed form and filed under subsection 156(4)
• Under subsection 156(3), it ceases when a member stops being a specified member or the members revoke it
• Subsection 156(5) makes the two persons jointly and severally liable for certain net tax

The CRA says the election does not affect the supplier’s eligibility for input tax credits. It differs from the section 167 election, which concerns the sale of a business. Ask whether the target has made or filed an election, and with whom.