An important deadline is approaching for GST/HST and QST registrants that are party to a joint election under section 156 of the Excise Tax Act (Canada) or to the equivalent election under the Act respecting the Québec sales tax. Where such an election (a "Related Party Election") was made prior to January 1, 2015 and was still in effect on that date, parties have until December 31, 2015 to file the required election forms with the applicable tax authorities in order for the Related Party Election to continue to apply to transactions occurring on or after January 1, 2015.
By way of background, the Related Party Election may generally be made by qualifying members of a qualifying group (i.e., certain closely related Canadian or Quebec resident corporations and Canadian or Quebec resident partnerships engaged exclusively in commercial activities) and allows such electing parties to make taxable supplies to one another without being required to collect or remit any GST/HST or QST by deeming such supplies to be made for nil consideration.
As mentioned in a previous Tax Law Update, a number of amendments were announced to the Related Party Election in the 2014 federal and Québec budgets. One such change was that the required forms for the Related Party Election now need to be filed with the applicable tax authorities. Before this amendment, such forms were simply retained in the parties' records and furnished to the tax authorities upon request. For elections made prior to January 1, 2015 and still in effect on that date, transition rules provide that the required forms (RC4616 federally and FP-4616 in Quebec) need to be filed by December 31, 2015 in order for such elections to continue to apply to transactions occurring on or after January 1, 2015.
The authors wish to thank Adam Drori for his valuable collaboration in drafting this article.