Section 156 of the Excise Tax Act (ETA) provides for an election to permit closely related corporations and Canadian partnerships to treat the provision of certain intercorporate taxable supplies, while the election is in effect, as having been made for no consideration.

In July 2016, CRA released Policy Statement P-255, Late-Filed Section 156 Elections and Revocations, describing conditions that must be met before they may accept a late-filed Section 156 Election or Revocation using Form RC4616. Consideration of whether to accept a late-filed election or revocation will be made on a case-by-case basis. This policy is effective January 1, 2015.

Among a number of conditions, CRA noted that:

  • A written request must be submitted to the Assistant Director of Audit of the Tax Services Office of the first specified member on the Form RC4616. The signed election must accompany the letter.
  • The request must provide a clear explanation as to why the election or revocation is late.
  • The parties must not have been negligent or careless in complying with Section 156 of the ETA.
  • Both specified members must be eligible to make the election as of the requested effective date. The letter should also indicate this.
  • As of the requested effective date, both parties must have acted as if the election was made. That is, the supplier must not have charged the GST/HST and the recipient must not have paid the GST/HST in respect of the supplies. Further, all GST/HST returns for both parties to the election must have been filed as required, all amounts owing must have been remitted, and both parties must be fully compliant with the GST/HST legislation.

For further information see VTN Monthly Tax Update Seminar, Issue No. 421