What the election does
Related companies often supply each other with services, equipment or management help. Normally each of those supplies carries GST/HST, which the recipient then recovers through input tax credits. Under the election, eligible taxable supplies between the two members are treated as having been made for nil consideration, so the supplier does not account for tax on them.
The supplier’s own input tax credits on its costs of making those supplies are not affected. The aim is only to remove tax charged back and forth within a group.
Who can make it
Both parties must be specified members of a qualifying group. In general, that means registrants that are Canadian-resident corporations or Canadian partnerships, whose property is almost entirely used in commercial activities (generally 90% or more) or, where they have no property, whose supplies are almost entirely taxable. Individuals and trusts cannot be parties.
For corporations, being closely related generally requires a very high degree of ownership and control. The CRA’s test looks for at least 90% of the shareholder votes on all matters, along with ownership of at least 90% of the value and number of the issued shares that carry full voting rights under all circumstances. The control must be held by a corporation, so two companies owned by the same individual are generally not closely related for this purpose.
An illustrative example
Suppose Ontario holding company A owns all the voting shares of operating company B and of management company C, and all three are GST/HST registrants making taxable supplies. Illustratively, C charges B a monthly management fee. If B and C make the election, the fee can be treated as made for no consideration, so no HST is charged on it. Without the election, C would charge HST on the fee, and B would claim it back as an input tax credit.
The election does not apply to every supply. A sale of real property between the companies is excluded, as is a supply the recipient does not acquire exclusively for commercial activities. The usual treatment continues for those supplies.
Filing, timing and what to discuss with your accountant
The election and any revocation are made jointly on Form RC4616, with an effective date stated on the form. The CRA must receive it by the earliest due date of a GST/HST return for the period that includes the effective date, and late filings are accepted only in exceptional circumstances. The election ends if either party stops qualifying or if the two revoke it. The parties can also be jointly liable for tax on supplies between them that was not properly accounted for.
This election is a GST/HST concept and is separate from the income tax rules on associated corporations. Ask your accountant whether the group qualifies, whether the election saves meaningful administration or cash flow, and how the intercompany supplies should be recorded. Bring the share register, a corporate chart and a list of recurring intercompany charges.
Sources & editorial notes
Sources checked October 24, 2026. The examples are illustrative and provide general information. Discuss how the guidance applies to your circumstances with your accountant.
- GST/HST Memorandum 14-5: Election to Deem Supplies to be Made for Nil ConsiderationCanada Revenue Agency
- GST/HST Memorandum 14-7: Closely Related CorporationsCanada Revenue Agency
- RC4616 Election or Revocation of an Election for a Qualifying Group to Treat Certain Taxable Supplies as Having Been Made for Nil Consideration for GST/HST PurposesCanada Revenue Agency
Rules and guidance can change. Use the current official source and confirm the treatment for your facts. To flag an error, contact Sora.