Excise Tax Act (R.S.C., 1985, c. E-15)

Marginal note:Supply by small supplier not a registrant

166 If a person makes a taxable supply and the consideration or a part of it for the supply becomes due, or is paid before it becomes due, at a time when the person is a small supplier who is not a registrant, that consideration or part, as the case may be, shall not be included in calculating the tax payable in respect of the supply except if the supply is

• (a) a supply by way of sale of real property;

• (b) a supply by way of sale of personal property by a municipality that is capital property of the municipality; or

• (c) a supply by way of sale of designated municipal property of a person designated to be a municipality for the purposes of section 259 that is capital property of the person.

Marginal note:Supply of assets of business

• 167 (1) Where a supplier makes a supply of a business or part of a business that was established or carried on by the supplier or that was established or carried on by another person and acquired by the supplier, and, under the agreement for the supply, 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,

  • (a) for the purposes of this Part, the supplier shall be deemed to have made a separate supply of each property and service that is supplied under the agreement for consideration equal to that part of the consideration for the supply of the business or part that can reasonably be attributed to that property or service; and

  • (b) except where the supplier is a registrant and the recipient is not a registrant, the supplier and the recipient may make a joint election in prescribed form containing prescribed information to have subsection (1.1) apply to those supplies.

• Marginal note:Effect of election

  (1.1) Where a supplier and a recipient make a joint election under subsection (1) in respect of a supply of a business or part of a business 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 in respect of the supply of any property or service made under the agreement for the supply of the business or part, or on such later day as the Minister may determine on application of the recipient,

  • (a) no tax is payable in respect of a supply of any property or service made under the agreement other than

    • (i) a taxable supply of a service that is to be rendered by the supplier,

    • (ii) a taxable supply of property by way of lease, licence or similar arrangement, and

    • (iii) where the recipient is not a registrant, a taxable supply by way of sale of real property; and

  • (b) for the purposes of this Part,

    • (i) where, but for this subsection, tax would have been payable by the recipient in respect of a supply made under the agreement of property that was capital property of the supplier and that is being acquired by the recipient for use as capital property of the recipient, the recipient shall be deemed to have so acquired the property for use exclusively in the course of commercial activities of the recipient, and

    • (ii) where, notwithstanding this subsection, tax would not have been payable by the recipient in respect of a supply made under the agreement of property that was capital property of the supplier and that is being acquired by the recipient for use as capital property of the recipient, the recipient shall be deemed to have so acquired the property for use exclusively in activities of the recipient that are not commercial activities.

• Marginal note:Supply of business assets of deceased

  (2) Where

  • (a) immediately before death, an individual held property for consumption, use or supply in the course of a business carried on immediately before the individual’s death,

  • (b) the estate of the deceased individual makes a supply, in accordance with the individual’s will or the laws relating to the succession of property on death, of the property to another individual who is a beneficiary of the estate and a registrant,

  • (c) the property is received for consumption, use or supply in the course of commercial activities of the other individual, and

  • (d) the estate and the other individual jointly elect under this subsection,

  no tax is payable in respect of the supply and the other individual shall, for the purposes of this Part, be deemed to have acquired the property for use exclusively in commercial activities of the individual.

Marginal note:Goodwill

167.1 For the purposes of this Part, where a supplier makes a supply of a business or part of a business that was established or carried on by the supplier or that was established or carried on by another person and acquired by the supplier, 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, and part of the consideration for the supply can reasonably be attributed to goodwill of the business or part, that part of the consideration shall not be included in calculating the tax payable in respect of the supply.

Marginal note:Definitions

• 167.11 (1) The following definitions apply in this section.

  authorized foreign bank

  authorized foreign bank has the meaning assigned by section 2 of the Bank Act. (banque étrangère autorisée)

  foreign bank branch

  foreign bank branch means a branch as defined in paragraph (b) of the definition branch in section 2 of the Bank Act. (succursale de banque étrangère)

  qualifying supply

  qualifying supply means a supply of property or a service that is made in Canada under an agreement for the supply (other than an agreement between a supplier that is a registrant and a recipient that is not a registrant at the time the agreement is entered into) and

  • (a) that is made by a corporation resident in Canada related to the recipient;

  • (b) that is made after June 27, 1999, and before

    • (i) if the Superintendent makes an order under subsection 534(1) of the Bank Act in respect of the recipient after the particular day on which the Act enacting this section receives royal assent but before the day that is one year after the particular day, the day that is one year after the day on which the Superintendent makes the order, and

    • (ii) in any other case, the day that is one year after the particular day referred to in subparagraph (i); and

  • (c) that is received by a recipient that

    • (i) is a non-resident person,

    • (ii) is, or has filed an application with the Superintendent for an order under subsection 524(1) of the Bank Act to become, an authorized foreign bank, and

    • (iii) acquired the property or service for consumption, use or supply by the recipient for the purpose of the establishment and commencement of business in Canada by the recipient as an authorized foreign bank at a foreign bank branch of the authorized foreign bank. (fourniture admissible)

• Marginal note:Supply of assets

  (2) For the purposes of this Part, if a supplier and a recipient of a qualifying supply make a joint election in accordance with subsection (7) in respect of the qualifying supply,

  • (a) the supplier is deemed to have made, and the recipient is deemed to have received, a separate supply of each property and service that is supplied under the agreement for the qualifying supply for consideration equal to that part of the consideration for the qualifying supply that can reasonably be attributed to that property or service;

  • (b) any part of the consideration for the qualifying supply attributed to goodwill is deemed to be attributed to a taxable supply of intangible personal property unless section 167.1 applies to the qualifying supply; and

  • (c) subsections (3) to (6) apply to the supply of each property and service that is supplied under the agreement for the qualifying supply.

• Marginal note:Effect of election

  (3) For the purposes of this Part, if a supplier and a recipient make a joint election referred to in subsection (2) in respect of a qualifying supply made at any time,

  • (a) no tax is payable in respect of a supply of any property or service made under the agreement for the qualifying supply other than

    • (i) a taxable supply of a service that is to be rendered by the supplier,

    • (ii) a taxable supply of a service unless paragraph 167(1)(a) applies to the qualifying supply,

    • (iii) a taxable supply of property by way of lease, licence or similar arrangement,

    • (iv) if the recipient is not a registrant, a taxable supply by way of sale of real property,

    • (v) a taxable supply of property or a service, if the property or service was previously supplied under an agreement for a qualifying supply and, by reason of this subsection, no tax was payable in respect of that previous supply of property or service, and

    • (vi) a taxable supply of intangible personal property (other than capital property) if the percentage determined by the following formula is greater than 10%:

      A - B

      where

      A

      is the extent (expressed as a percentage of the total use of the property by the supplier) to which the supplier used the property in commercial activities immediately before that time, and

      B

      is the extent (expressed as a percentage of the total use of the property by the recipient) to which the recipient used the property in commercial activities immediately after that time;

  • (b) if, in the absence of this subsection, tax would have been payable by the recipient in respect of a supply of property made under the agreement for the qualifying supply, the property was capital property of the supplier and the property is being acquired by the recipient for use as capital property of the recipient, the recipient is deemed to have so acquired the property for use exclusively in the course of commercial activities of the recipient;

  • (c) if, despite this subsection, tax would not have been payable by the recipient in respect of a supply of property made under the agreement for the qualifying supply, the property was capital property of the supplier and the property is being acquired by the recipient for use as capital property of the recipient, the recipient is deemed to have so acquired the property for use exclusively in activities of the recipient that are not commercial activities; and

  • (d) if the recipient acquires under the agreement for the qualifying supply property of the supplier that was used by the supplier immediately before that time otherwise than as capital property of the supplier and, in the absence of this paragraph, tax would have been payable by the recipient in respect of the supply of the property, the recipient is deemed to have acquired the property for consumption, use or supply in the course of commercial activities and otherwise than as capital property of the recipient.

• Marginal note:Basic tax content

  (4) For the purposes of this Part, if a supplier and a recipient make a joint election referred to in subsection (2) in respect of a qualifying supply and, under the agreement for the qualifying supply, the supplier makes a supply of property that is, immediately before the time the qualifying supply is made, capital property of the supplier and, by reason of subsection (3), no tax is payable in respect of the supply of the property, the basic tax content of the property of the recipient at any time shall be determined by applying the following rules:

  • (a) if the last acquisition of the property by the recipient is the acquisition by the recipient at the time the qualifying supply is made, any reference in paragraphs (a) and (b) of the definition basic tax content in subsection 123(1) to the last acquisition or importation of the property by the person shall be read as a reference to the last acquisition or importation of the property by the supplier and not the acquisition by the recipient at the time the qualifying supply is made;

  • (b) if the last supply to the recipient of the property is the supply to the recipient at the time the qualifying supply is made, the reference in paragraph (a) of the definition basic tax content in subsection 123(1) to the last supply of the property to the person shall be read as a reference to the last supply of the property to the supplier and not the supply to the recipient at the time the qualifying supply is made; and

  • (c) if, at any particular time on or after the last acquisition or importation of the property by the supplier and before the time the qualifying supply is made, the property is acquired, imported or brought into a participating province or an improvement to the property is acquired, imported or brought into a participating province, any reference in paragraphs (a) and (b) of the definition basic tax content in subsection 123(1) to

    • (i) any acquisition, importation or bringing into a participating province of the property at that particular time or any acquisition, importation or bringing into a participating province of an improvement to the property at that particular time (in this paragraph referred to as the “actions”) by the person shall be read as a reference to actions by the supplier and not actions by the recipient,

    • (ii) any tax that was payable, that would have been or would have become payable, that became payable or that had been payable by the person in respect of those actions at that particular time shall be read as a reference to tax that was payable, that would have been or would have become payable, that became payable or that had been payable by the supplier and not by the recipient,

    • (iii) the person in respect of those actions at that particular time, or in respect of a particular status of the person at that particular time, shall be read as a reference to the supplier and not to the recipient,

    • (iv) any tax that the person was exempt from paying in respect of those actions at that particular time shall be read as a reference to tax that the supplier, and not the recipient, was exempt from paying,

    • (v) the person’s percentage for a participating province determined for the purposes of subsection 225.2(2) for the person’s taxation year that includes the time that an amount of tax became payable, or would have become payable by the person while the person was a selected listed financial institution, shall be read as a reference to the supplier’s percentage for a participating province determined for the purposes of subsection 225.2(2) for the supplier’s taxation year that includes the time that an amount of tax became payable, or would have become payable while the supplier was a selected listed financial institution, and

    • (vi) all amounts that the person was, or would have been, entitled to recover by way of rebate, refund, remission or otherwise in respect of those actions at that particular time shall be read as a reference to all amounts that the supplier, and not the recipient, was, or would have been, entitled to recover by way of rebate, refund, remission or otherwise in respect of those actions.

• Marginal note:Adjustment to net tax

  (5) For the purposes of this Part, if a supplier and a recipient make a joint election referred to in subsection (2) in respect of a qualifying supply made before November 17, 2005 under an agreement for the qualifying supply and tax is paid by the recipient in respect of property or a service supplied under the agreement for the qualifying supply despite no tax being payable in respect of that supply as a result of subsection (3), the tax is deemed, except for the purposes of subsection (4) and despite subsection (3), to have been payable by the recipient in respect of the supply of the property or service and, in determining the net tax for the particular reporting period of the recipient in which the election is filed with the Minister, the recipient may deduct in determining the net tax of the recipient for the particular reporting period the total of all amounts each of which is an amount determined by the formula

  A - B

  where

  A

  is the amount of tax paid, despite no tax being payable as a result of subsection (3), by the recipient in respect of the supply of the property or service made under the agreement for the qualifying supply; and

  B

  is the total of

  • (a) all amounts each of which is an input tax credit that the recipient was entitled to claim in respect of the property or service supplied under the agreement for the qualifying supply,

  • (b) all amounts each of which is an amount (other than an amount determined under this subsection) that may be deducted by the recipient under this Part in determining the net tax of the recipient for a reporting period in respect of the property or service supplied under the agreement for the qualifying supply, and

  • (c) all amounts (other than amounts referred to in paragraphs (a) and (b)) in respect of the tax paid that may be otherwise recovered by way of rebate, refund, remission or otherwise by the recipient in respect of the property or service supplied under the agreement for the qualifying supply.

• Marginal note:Limitation period where election

  (6) If a supplier and a recipient make a joint election referred to in subsection (2) in respect of a qualifying supply, section 298 applies to any assessment, reassessment or additional assessment of an amount payable by the recipient in respect of a supply of property or a service made under the agreement for the qualifying supply, but the Minister has until the day that is four years after the later of the day on which the election under subsection (2) is filed with the Minister and the day on which the qualifying supply is made, to make any assessment, reassessment or additional assessment solely for the purpose of taking into account any tax, net tax or any other amount payable by the recipient or remittable by the supplier in respect of a supply of property or a service made under the agreement for the qualifying supply.

• Marginal note:Validity of election

  (7) A joint election referred to in subsection (2) made by a supplier and a recipient in respect of a qualifying supply is valid only if

  • (a) the recipient files the election with the Minister in prescribed form containing prescribed information not later than the particular day that is the latest of

    • (i) if the recipient is

      • (A) a registrant at the time the qualifying supply is made, the day on or before which the return under Division V is required to be filed for the recipient’s reporting period in which tax would, in the absence of this section, have become payable in respect of the supply of property or service made under the agreement for the qualifying supply, or

      • (B) not a registrant at the time the qualifying supply is made, the day that is one month after the end of the recipient’s reporting period in which tax would, in the absence of this section, have become payable in respect of the supply of property or service made under the agreement for the qualifying supply,

    • (ii) the day that is one year after the day on which the Act enacting this section receives royal assent, and

    • (iii) the day that the Minister may determine on application of the recipient;

  • (b) the qualifying supply is made on or before the day that is one year after the day on which the recipient received for the first time a qualifying supply in respect of which an election under subsection (2) has been made; and

  • (c) on or before the day on which the election referred to in subsection (2) is filed in respect of the qualifying supply, the recipient has not made an election under subsection 167(1.1) in respect of the qualifying supply.