Form GST44 is the prescribed form for the joint election in Excise Tax Act section 167(1). Where it applies, no GST/HST is payable on almost everything supplied under an asset purchase agreement. It carries three statutory conditions, three carve-outs, and one deadline — the recipient’s own return for the period in which the tax would otherwise have been payable.
Key takeaways
SECTION 01 OF 10
An asset purchase is a bundle of taxable supplies: the buyer funds the tax at closing and recovers it later. CRA on which rate to charge: “The furniture store charges 13% HST on the sale because the place of supply is Ontario.” On a $2 million price — chosen for the illustration, not drawn from data — that is $260,000 of cash, tax Treadstone Law calls an amount “the purchaser would then have to fund up front”.
Our article on the GST/HST election on an asset sale covers why the relief exists; Treadstone Law treats tax as the default. Here, the mechanics.
SECTION 02 OF 10
Section 167, marginal note Supply of assets of business, imposes two requirements. The supplier must supply “a business or part of a business that was established or carried on by the supplier”, or acquired from someone who did. And under the agreement “the recipient is acquiring ownership, possession or use of all or substantially all of the property that can reasonably be regarded as being necessary for the recipient to be capable of carrying on the business or part as a business”.
Paragraph (b) writes the third condition as an exception: the parties may make “a joint election in prescribed form containing prescribed information”, but only “except where the supplier is a registrant and the recipient is not a registrant”. CRA puts it positively in Memorandum 14-4: “Also, to qualify for the election under subsection 167(1), if the supplier is a GST/HST registrant, the recipient must also be a registrant.”
That memorandum is an administrative position and says so: “The information in this memorandum does not replace the law found in the Excise Tax Act and its regulations.” Form GST44 recasts the rule as three permitted pairings, the third of which surprises people — “The supplier is a non-registrant and the recipient is a registrant.” Only the reverse is barred.
SECTION 03 OF 10
The number everyone repeats is not in the statute. It is in CRA’s definitions on Form GST44: “All or substantially all generally means 90% or more.” Memorandum 14-4 carries the same parenthesis.
The memorandum also states the denominator, which the bare percentage hides: “The value of any property that is not acquired under the agreement for the supply, but that the recipient requires to carry on the business must generally be not more than 10% of the fair market value of all the property necessary to carry on the business.” The comparison is against what the business needs at fair market value, not the price. Treadstone Law: “The law does not set a fixed percentage that automatically qualifies or disqualifies a sale”.
SECTION 04 OF 10
Subsection 123(1) defines business widely — it “includes a profession, calling, trade, manufacture or undertaking of any kind whatever” — but breadth cuts both ways. Form GST44: “The sale of individual assets of a business is not a supply of part of the business.” CRA’s example is a carrier buying one tractor-trailer: the only property under the agreement, so no election.
Part of a business is defined administratively as “an activity that may be a functionally and physically discrete operating unit”, CRA’s illustration being a pulp mill’s printing division. Treadstone Law puts it from the deal side: a going concern, not unrelated assets.
SECTION 05 OF 10
Paragraph 167(1)(b) requires prescribed form and prescribed information, and section 123(1) hands that content to CRA: prescribed means, “in the case of the manner of making or filing an election, authorized by the Minister”. The authorised form is GST44, which identifies both parties, the acquisition date, the recipient’s reporting period and the property acquired, and is certified by each side.
Filing is not a separate submission. The form: “A recipient who is a GST/HST registrant must send this form, with their GST/HST return for the reporting period in which the acquisition was made, to the address specified on the return.”
Where neither party is registered there is nothing to file — “When the supplier and recipient are both non-registrants, you do not need to send this form” — and instead “the recipient must keep this form (or a copy) on file”. Retain-and-do-not-file is the non-registrant case, so a registrant buyer whose signed GST44 sits in the closing binder has filed nothing.
SECTION 06 OF 10
Subsection 167(1.1), marginal note Effect of election, makes the relief conditional on filing: it applies where the parties elect and “the recipient, if a registrant, files the election with the Minister not later than the day on or before which the return under Division V is required to be filed for the recipient’s first reporting period in which tax would, but for this subsection, have become payable”.
There is no fixed number of days after closing. Section 238(1): most registrants file “within one month after the end of the reporting period of the registrant”, and one on a fiscal-year period “within three months after the end of the year”. CRA assigns that frequency on revenue, as Treadstone Law’s note on reporting periods sets out.
The statute leaves a discretion: the election may also be filed “on such later day as the Minister may determine on application of the recipient”, restated by CRA as “In some cases, upon application by the recipient, the CRA may determine a later date.” I could find no published time limit or criteria for it, so nothing here says a late election will be accepted.
SECTION 07 OF 10
Subsection 167(1.1)(a) provides that “no tax is payable in respect of a supply of any property or service made under the agreement other than” three things: “a taxable supply of a service that is to be rendered by the supplier”; “a taxable supply of property by way of lease, licence or similar arrangement”; and “where the recipient is not a registrant, a taxable supply by way of sale of real property”.
The lease exception reaches the commonest structure in Canadian owner-operator deals: the seller keeps the building and leases it to the buyer, which Treadstone Law confirms is generally a taxable supply. Our article on a pre-closing carve-out follows that retained property into the all-or-substantially-all test. Transition services the vendor has still to render are taxable too; the third exception falls away for a registrant buyer, with self-assessment in its place; and a price silent on being HST-included or HST-extra exposes both sides.
SECTION 08 OF 10
Section 167.1, marginal note Goodwill, runs independently of the election. Where the same conditions are met and part of the consideration is reasonably attributable to goodwill, that part “shall not be included in calculating the tax payable in respect of the supply”. No election, no form. CRA agrees: “section 167.1 provides that GST/HST is still not applied to that portion of the consideration that is reasonably attributed to goodwill”. A deal that meets the conditions but misses the election is therefore not fully taxable, and on a service business goodwill is the largest line in the schedule.
SECTION 09 OF 10
Form GST44 states the disqualifier in one sentence: “If the supplier is a GST/HST registrant and the recipient is not a registrant, this election cannot be made.” The seller of an operating business is registered, so the buyer’s status alone decides whether the relief exists.
The trap is a company incorporated to do the deal. Section 240(2.1) requires it to apply only “before the day that is 30 days after” the day it first makes a taxable supply otherwise than as a small supplier — a timetable that lets registration finish weeks after closing. Our article on the GST/HST registration a buyer forgets works that through; a buyer can be on time under section 240 and still fail paragraph 167(1)(b) at the transaction.
Nothing bounces: subsection 167(1.1) conditions the relief on filing by “the recipient, if a registrant”, and a non-registrant has no return to attach GST44 to. It surfaces on audit, when Treadstone Law applies: “HST is treated as having applied to the sale all along, as though no election had ever been filed”.
SECTION 10 OF 10
The bill lands on the seller first, because collection is the supplier’s duty: subsection 221(1) provides that “Every person who makes a taxable supply shall… collect the tax”. Treadstone Law agrees — “this exposure typically lands on the seller first” — as does its answer on HST on business assets. The window is long and does not run from closing: section 296 lets the Minister assess, section 298(1)(a) allows four years from the return, and section 280(1) adds interest “at the prescribed rate”.
Four things close the gap, all before closing: make the registration effective before the closing date, not 30 days after; make a signed GST44 a closing deliverable and diarise the filing date off the reporting period on it; document the all-or-substantially-all analysis at the time, where Treadstone Law’s HST diligence checklist and its note on the going-concern election earn their keep; and price the rest with “a representation that the conditions for the election are met, and often an indemnity or gross-up clause”. If the answer is arguable, an advance GST/HST ruling binds CRA on the facts described — but the statute is what an assessment measures against.
No. The statutory test in section 167 is functional — can the buyer carry on the business with what it acquired — and no percentage appears there. The 90 per cent figure is CRA’s administrative position, printed on Form GST44 itself, and is where an auditor starts rather than what the Act requires.
No. Subsection 167(1.1) ties the deadline to the day the recipient’s own GST/HST return is due for the period in which the acquisition happened. Most registrants file within one month after their reporting period ends, or three months on a fiscal-year period, so the real deadline depends on the buyer’s assigned filing frequency.
Yes. Section 167.1 exempts goodwill independently of the election, under the same conditions. Where part of the price is reasonably attributable to goodwill, that part is not included in calculating the tax payable, with no form and no election required — so a deal that meets the conditions but misses the election is not fully taxable.
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