Buyers form a company, sign an asset purchase agreement, and treat GST/HST as something for the accountant afterwards. Excise Tax Act section 240 imposes a registration duty with its own clock, and the most valuable relief in an asset deal — the joint election in section 167 — is switched off entirely when the buyer is not a registrant. Not a penalty for lateness: a precondition, tested against a status the buyer either held or did not.
Key takeaways
SECTION 01 OF 09
Subsection 123(1) says “registrant means a person who is registered, or who is required to be registered, under Subdivision D of Division V”. Read the second limb: a person who should have registered and never did is a registrant anyway, with the obligations that follow.
The reverse limb costs buyers money. Someone not required to register who has not applied is not a registrant — whatever they are about to buy. A numbered company incorporated last month to take an asset transfer is exactly that person on the morning of closing.
Status decides what relief a transaction can reach. Treadstone Law: “The new corporation is a different legal entity and generally must obtain its own GST/HST registration number.”
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The marginal note on section 240(1) is Registration required: “Every person who makes a taxable supply in Canada in the course of a commercial activity engaged in by the person in Canada is required to be registered”. A duty keyed to making supplies, not to reaching an amount.
Three exceptions follow and only the first usually matters: “(a) the person is a small supplier”. The others cover real property sold outside a business, and non-residents carrying on no business here.
The defined terms do quiet work. A “taxable supply” is one “made in the course of a commercial activity”, which includes a business carried on “except to the extent to which the business involves the making of exempt supplies” (s. 123(1)). An acquired going concern is the paradigm case.
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Subsection 240(2.1), marginal note Application, requires a person to “apply to the Minister for registration before the day that is 30 days after… the day the person first makes a taxable supply in Canada, otherwise than as a small supplier”.
That clock does not start at incorporation, at closing, or when CRA writes to you. It starts on a date that exists only once you know when small supplier status ended, so the deadline runs backwards from a fact about the business. CRA frames it as “within 29 days of your effective date of registration” on its guidance (modified 16 June 2026).
Nor is the effective date the applicant’s to choose: as Treadstone Law puts it, “it may not be the date you apply”.
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The exception points at section 148, marginal note Small suppliers. A person qualifies if consideration that became due “in the four calendar quarters immediately preceding… for taxable supplies” does not exceed “$30,000” — the same figure CRA publishes.
A company incorporated three weeks ago has no preceding four quarters, so the total is nil and it is a small supplier — correctly, on the statute’s terms. That is the false comfort: the advice that it need not register on day one is right, and answers a narrower question than the deal asks.
Three receipts are excluded from the count: financial services, sales of capital property, and “consideration referred to in section 167.1 that is attributable to goodwill of a business”. Treadstone Law’s piece on the threshold explains the rolling measurement but declines to state a figure, telling readers to confirm it with CRA.
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First, associates. Section 148(1) counts consideration that became due “to the person or an associate of the person”. A buyer who already controls a trading company and incorporates a second gets no fresh $30,000 — Treadstone Law describes the same effect as combining revenue from businesses “under common control”.
Second, arithmetic. Subsection 148(2) provides that once a quarter’s taxable supplies exceed $30,000, “the person is not a small supplier throughout the period beginning immediately before that time”. CRA: “You have to start charging GST/HST on the supply that made you exceed $30,000.”
Until then, the only thing keeping tax off the invoices is section 166, which applies where consideration becomes due “when the person is a small supplier who is not a registrant”. And section 221(1) obliges “every person who makes a taxable supply” — not every registrant — to collect it.
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Subsection 240(3), marginal note Registration permitted, lets someone not required to register apply anyway if they fit one of its paragraphs. The general one is (a): the applicant “is engaged in a commercial activity in Canada”. Present tense — a state of affairs, not a plan.
Parliament made one express accommodation for a planned acquisition, and what it omits matters. Paragraph 240(3)(d)(ii) covers a resident corporation “that is acquiring, or proposes to acquire, all or substantially all of the issued and outstanding shares” of a company whose property is used exclusively in commercial activities. Those words are absent from paragraph (a), and (d)(ii) is about shares.
So a share-purchase holdco has an express route in; a company formed to buy assets must satisfy paragraph (a) on the facts as they stand. Settle that with CRA and an adviser against the real timeline. Treadstone Law’s note on holdco registration answers a different question — passive holdcos make no taxable supplies.
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Our article on the GST/HST election on an asset sale sets out what the relief does and what the “all or substantially all” test requires. This condition sits upstream of all of it.
Paragraph 167(1)(b) permits the joint election “except where the supplier is a registrant and the recipient is not a registrant”. The seller of an operating business is a registrant — that is why they have charged tax for years. If the buyer’s new company is not, the exception is engaged and there is no election to make. Not a harder election, or a late one. None.
The filing machinery assumes it too: 167(1.1) requires that “the recipient, if a registrant, files the election” by the due date for its first reporting period. A non-registrant has none. The paragraph is also silent on when status is tested — reason enough not to reconstruct it later.
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Tax becomes payable on the supplies under the agreement, funded in cash at closing on top of the price. One component escapes regardless: section 167.1, marginal note Goodwill, provides that the consideration reasonably attributable to goodwill “shall not be included in calculating the tax payable”, and does not depend on the election. Equipment and inventory are not so lucky.
Recovery is not automatic either. Subsection 169(1) gives an input tax credit only where tax becomes payable “during a reporting period of the person during which the person is a registrant”. 171(1) softens that: on registering, a former small supplier is deemed to have paid tax “equal to the basic tax content of the property”, a formula amount reaching property still held, not services consumed. Treadstone Law: “Unregistered businesses cannot claim input tax credits, even if they paid HST.”
Real property compounds it. Even where the election is available, 167(1.1)(a)(iii) keeps tax payable on a sale of real property “where the recipient is not a registrant”. A registered buyer usually pays the seller nothing: 221(2)(b) relieves the supplier from collecting and 228(4) has the buyer self-assess.
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The number does not travel with the business on an asset deal. Treadstone Law puts it plainly: in an asset sale “the buyer is generally a different legal person… not the entity the CRA associates with the seller’s existing business number”, and incorporating does not produce one — “Incorporation and CRA registration are related but separate.” Applying is easy: a business number and an RT identifier, after which section 241 has the Minister assign it and notify the effective date.
Do it before closing and make the election a term of the agreement. Voluntary registrants get some slack — CRA says the effective date is “usually the day you request your GST/HST account (or up to 30 days before that day)”, and the case for registering early rests on ITC recovery, not on rescuing deals. That is calendar slack, not a repair kit: CRA can back-date to the day registration was first required, a tool for collecting unremitted tax; leaning on a retroactive date to satisfy 167(1)(b) is an argument, not a plan.
Then say who carries the cost if the assumption fails. Treadstone Law notes that a price stated without addressing tax “creates avoidable risk for both sides”, and that an invalid election means tax is treated “as having applied all along”, with the seller generally on the hook. That analysis never mentions registrant status — the failure mode neither side sees.
It depends on whether it is required to register, which turns on facts, not on being new. A company with no trading history has no preceding four quarters of taxable supplies and so qualifies as a small supplier — but that status can end the moment it acquires the target’s ongoing commercial activity.
Because paragraph 167(1)(b) permits the joint election except where the supplier is a registrant and the recipient is not. Sellers of an operating business are almost always registrants, so if the buyer’s new company is not, the exception is engaged and there is no election available at all — not a harder election, none.
No. The new corporation is a different legal entity and generally must obtain its own GST/HST registration number; incorporation and CRA registration are related but separate steps. Applying means a business number and an RT identifier, after which the Minister assigns it and notifies the effective date.
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