A section 167 GST/HST election is a joint filing under Excise Tax Act s. 167 that lets the buyer and seller of a business, sold as assets rather than shares, treat most of the transferred property as though no GST/HST applied to it at all — provided the buyer is acquiring “all or substantially all” of what it takes to carry on the business.
ETA s. 167(1) applies where 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.” With a joint election in prescribed form, s. 167(1.1)(a) provides that “no tax is payable” on the supply, with three carve-outs that stay taxable: services still to be rendered by the seller, property transferred by lease or licence, and — where the buyer is not a GST/HST registrant — real property sold by way of sale. The filing deadline is tied to the buyer’s own return: the election is due “not later than the day on or before which the return… is required to be filed for the recipient’s first reporting period” in which tax would otherwise have become payable.
Goodwill sits outside GST/HST regardless of the election — s. 167.1 excludes consideration attributable to goodwill from tax entirely. Treadstone Law’s guidance on the mechanics confirms the buyer-side condition in practice: eligibility typically requires the purchaser to be a registered GST/HST participant, which is why a buyer’s registration is usually made an explicit closing condition rather than assumed — without it, the election is unavailable and the deal is priced with GST/HST cash flow built in until input tax credits catch up.
A fund’s newco acquires substantially all the operating assets of a target for $4M, allocated $2.6M to equipment and inventory, $1.2M to goodwill, and $200,000 to other business property. The newco confirms its GST/HST registration as a closing condition, and the parties file the s. 167(1) election so no GST/HST applies to the $2.6M taxable asset bundle at closing — a real, upfront cash saving — while the $1.2M goodwill portion was never taxable in the first place under s. 167.1.
See also: Section 22 election · Section 116 clearance certificate · Purchase price allocation.
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