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GST/HST ‘Closely Related' Election - New Rules and Filing Deadlines


​​​​​​​​The ‘closely related’ election, found in section 156 of the Excise Tax Act, provides that certain related corporations and partnerships can ‘sell’ certain goods and services to other members of the group without having to collect GST/HST. If you qualify to make this election, you may be interested in the changes described below. To make the election, all members of the ‘qualifying group’ must be engaged exclusively in commercial activities and their revenues must be taxable for GST/HST purposes. The election simplifies compliance and facilitates cash flow.

Before 2015, the election did not have to be filed with the Canada Revenue Agency (CRA); rather, it had to be kept on file in case the CRA wanted to see it. Beginning in 2015, however, the election must be filed. Elections made prior to 2015 will not be valid if simply kept on file. If you made the election before 2015, you need to file the new election form before 2016. Whether for an existing election or a new one, you can file a hard copy or file it electronically through the CRA’s ‘My Business Account’. The new form is RC4616 and replaces the former form GST25.

The due dates for new elections, i.e. those not made before 2015, depend on GST/HST return due dates. These elections are required to be filed by the earliest due date of the GST/HST return for any of the parties to the election for the reporting period in which the election is to become effective. For example, if a specified member files monthly based on calendar months and the effective date of the election is to be July 15, the election must be filed before the end of August.

The new rules also include changes to certain conditions pertaining to eligibility for making the election and the assumption of joint risks and liabilities related to ineligible or incorrectly applied elections. Determining whether the election can be made can be complicated, depending on the relationships between the parties and the types of entities involved. Be sure to consult with your professional advisor if you are unsure about this as the consequences of an ineligible election can be significant.