Excise Tax Act s. 325 is usually described as “section 160 for GST/HST”. The two share a skeleton, but read side by side they diverge in six places: what counts as property, what clock the cap runs on, how many heads of liability the section carries, and a formula with no counterpart in the income tax version.
Key takeaways
SECTION 01 OF 10
Excise Tax Act s. 325(1), marginal note Tax liability re transfers not at arm’s length, applies “[w]here at any time a person transfers property, either directly or indirectly, by means of a trust or by any other means” to a spouse or common-law partner (including one who “has since become” that), “an individual who was under eighteen years of age”, or “another person with whom the transferor was not dealing at arm’s length”.
Transferor and transferee are then “jointly and severally, or solidarily, liable to pay under this Part” an amount capped by the value the transferee got for nothing and by what the transferor owed — and Part IX is the GST/HST part, so nothing else. The income tax provision has its own article at section 160: how moving an asset can move the tax bill with it.
SECTION 02 OF 10
Same three recipient classes in near-identical words, same joint-and-several / solidary formula, same cap at the lesser of the value shortfall and the transferor’s own liability, no intent requirement, and no limitation period — ETA s. 325(2) and ITA s. 160(2) both let the Minister assess “at any time”. Both also carry discharge mechanics, separated-spouse relief, and anti-avoidance rules from one 2022 statute (S.C. 2022, c. 19, ss. 38 and 64).
SECTION 03 OF 10
Income tax is a charge on a company’s own profit. GST/HST net tax is largely money it took from customers on the Crown’s behalf. ETA s. 222(1), marginal note Trust for amounts collected, deems anyone who collects an amount as or on account of tax “to hold the amount in trust for Her Majesty in right of Canada, separate and apart from the property of the person” until it is remitted.
Treadstone Law’s note on the deemed trust: the tax on a sale “is never really an asset of the business”. Its answer on HST collected but not remitted is blunter — “it is the government’s money, not yours”. Its answer on CRA collection of GST/HST debt does not reach s. 325 but reports that the CRA uses “largely the same collection tools” as for income tax.
SECTION 04 OF 10
ETA s. 325(0.1), marginal note Definitions, defines two terms: “property includes money” and “transaction includes an arrangement or event”. The income tax equivalent does half of that. ITA s. 160(0.1), marginal note Interpretation, reads in full: “In this section and section 160.01, a transaction includes an arrangement or event.”
So the cash cases — a dividend to a related shareholder, a draw, a shareholder-loan repayment, a transfer between companies under common control — sit inside the express words of the GST/HST provision. Under the income tax provision the same result comes from general principles rather than a definition on the page.
SECTION 05 OF 10
ITA s. 160(1)(e)(ii) totals what the transferor owes “in or in respect of the taxation year in which the property was transferred or any preceding taxation year”. ETA s. 325(1)(e)(i) totals what the transferor is liable to pay or remit “for the reporting period of the transferor that includes that time or any preceding reporting period of the transferor”.
A reporting period is not a year. Treadstone Law’s note on HST reporting periods explains that the CRA sorts registrants into “one of three reporting periods” — monthly, quarterly or annual — on total annual taxable supplies, giving no dollar thresholds because the bands are administrative. ETA s. 325(1)(e)(ii) adds a limb the income tax cap does not list separately: “interest or penalty for which the transferor is liable as of that time”.
SECTION 06 OF 10
ITA s. 160(1) creates two. Paragraph (d) makes the transferee liable for the part of the transferor’s tax attributable to the attribution rules in ss. 74.1 to 75.1 on income from the transferred property. Paragraph (e) is the value-shortfall liability everyone means by “section 160”. ETA s. 325(1) has only the second — there are no GST/HST attribution rules for a paragraph (d) to attach to.
Section 160 also houses joint liability for deemed dispositions under s. 69(11), split income, split-pension income, spousal trusts under s. 104(13.4) and — relevant here — the elections behind an intergenerational business transfer under s. 84.1(2.31) and (2.32), an employee ownership trust transfer under s. 110.61 and a cooperative conversion under s. 110.62. Section 325 has no equivalents.
SECTION 07 OF 10
ETA s. 325(1)(d) states a formula, A − B, not a bare shortfall. A is the familiar figure: fair market value of the property less fair market value of the consideration given for it. B is the amount by which “the amount assessed the transferee under subsection 160(2) of the Income Tax Act in respect of the property exceeds the amount paid by the transferor in respect of the amount so assessed”.
An income tax assessment on the same property therefore reduces the GST/HST one — the Excise Tax Act gives way. B is not frozen: it is that assessment net of what the transferor has since paid against it, so as the s. 160 assessment is paid down, B falls and the s. 325 exposure rises to match.
There is no mirror. ITA s. 160(1)(e)(i) has no subtraction for an amount assessed under s. 325 — the income tax cap is simply value less consideration, as Treadstone Law states in section 160 personal liability for a corporate tax debt. Which assessment comes first is not neutral.
SECTION 08 OF 10
Each subsection (1) ends with a saving clause. The Excise Tax Act version is short: “but nothing in this subsection limits the liability of the transferor under any provision of this Part.” The Income Tax Act version saves two things — the transferor’s liability under any other provision, “or of the transferee for the interest that the transferee is liable to pay … on an assessment in respect of the amount that the transferee is liable to pay because of this subsection”.
The income tax section therefore says expressly that interest on the transferee’s own assessment sits outside the cap; the GST/HST section does not. The same asymmetry runs through the cap: ITA s. 160(1)(e)(ii) confirms on its face that the counted liability includes “an amount that the transferor is liable to pay under this section” — chain liability through successive transfers. ETA s. 325(1)(e) omits it; that language appears only in the anti-avoidance rule at s. 325(5)(b).
SECTION 09 OF 10
Usually the answer is reassuring. Treadstone Law on a seller’s unpaid HST in an asset deal: “[g]enerally, no — an asset purchase is deliberately structured so the buyer only takes on the liabilities the purchase agreement says it’s taking on”. Its answer on buying only the assets adds that CRA amounts “can sit behind security registered against the seller’s assets”, and on a share purchase — “you’re buying the same corporation that owes the money”.
Section 325 is the narrow exception: it needs a non-arm’s-length recipient and a price below fair market value — the profile of the transactions around a sale rather than the sale itself. Moving a building out before the company is shopped. Selling a division to a sister corporation at book value. Distributing cash while GST/HST is outstanding.
Nor does the going-concern election touch it. ETA s. 167 subsection (1.1) provides that on a qualifying sale “no tax is payable in respect of a supply of any property or service made under the agreement”. That removes tax on the sale, not arrears — and Treadstone Law’s article on the election does not raise arrears either.
SECTION 10 OF 10
Treadstone Law’s guidance on reviewing HST compliance when buying a business asks for registration status across the periods reviewed, filed returns cross-checked against reported revenue, CRA correspondence about audits or payment arrangements, and outsized input tax credit claims. Its sharpest item separates filing from paying: “[p]roof of remittance, not just proof of filing — a return can be filed showing an amount owing that was never actually paid”. Then add what has left the company, because a s. 325 exposure is invisible on a balance sheet: the asset is already gone.
One contrast on timing. Director liability for unremitted net tax under ETA s. 323 is fenced by subsection (5): an assessment “shall not be made more than two years after the person last ceased to be a director”, and subsection (3) gives a due diligence defence. Treadstone Law’s answer on HST director liability confirms both, adding that the defence “is difficult to establish once the corporation has actually failed to remit”. Section 325 has neither. An old transfer is not a safe one.
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