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Death and (Indirect) Taxes

22/02/2018


The adage there are two certainties in life, death and taxes, not only extends to the more commonly suffered income taxes, but also to indirect taxes.  More specifically, the Goods and Services Tax /Harmonized Sales Tax (GST / HST).

This is particularly important for executors / administrators to take note of and not be caught off guard, because when a person dies, their GST / HST business number may not immediately die with them.

Section 267 of the Canadian Excise Tax Act ( ETA) provides for the estate to be a continuation of the deceased taxpayer.  Under this provision, the executor / administrator for your estate becomes responsible for carrying out not only the last wishes of the deceased, but also complying with the provisions of the ETA. The GST / HST account can continue, even though the individual has died.

There are many factors to consider on the date of death:

  • Has the executor / administrator notified the Canada Revenue Agency (CRA) of the date of death and provided the related documentation?
  • Did you know that the estate retains the same business number as that of the deceased?
  • Is the deceased compliant in respect of all GST / HST filings (including stub period filing) to the date of death?
  • At the time of death, did the deceased hold property for consumption, use or supply in the course of commercial activities? If so, has consideration been given to utilization of the election to have a tax-free roll-over of the property to the beneficiaries of the estate?
  • Is the estate aware that in the absence of the application of an election to have a tax-free roll-over of the property of the estate, there are GST / HST implications where property used in a commercial activity is held and the executor / administrator applies for a deregistration of the GST / HST for the estate?
  • Where the estate continues with the commercial activity of the deceased and is a GST registrant, GST / HST returns must continue to be filed by the estate. As such, has the executor / administrator filed the GST return(s) covering the periods subsequent to date to death to the end of the GST reporting period and each reporting period thereafter?
  • Has the estate collected GST in respect of taxable activities and taxable dispositions of property?
  • On the disposition of real property has the estate collected the GST or will the purchaser mandatorily be responsible for the self-reporting in respect of the purchase? Has the estate obtained certification from the purchaser in respect of the purchaser’s self-reporting?
  • If all GST returns have been filed and no further property is held by the estate for use in commercial activities, will the estate be making a request for a GST clearance certificate? Has the estate requested closure of the Business Number Program Account?

As you can see, there are many factors to consider when it comes to addressing the GST / HST reporting requirements of the deceased and their estate. Stepping into the shoes of an executor / administrator brings with it many responsibilities and can often be overwhelming. In a business situation, you are really acting in similar capacity of the individual when they were alive, working towards winding down the operations.

For more information, contact Patty Hnidy at 306.664.8319 or [email protected]