Closely Related Corporations (GST/HST) Regulations

3 For the purposes of paragraph 128(1)(b) of the Act, a corporation (in this section referred to as the “other corporation”) is a prescribed corporation in relation to a particular corporation

• (a) where

  • (i) the total value and number of all specified shares of the other corporation, each of which

    • (A) is owned by the particular corporation,

    • (B) is owned by a corporation that is closely related to the particular corporation by reason of paragraph 128(1)(a) of the Act,

    • (C) is owned by

      • (I) an employee of the other corporation, of a corporation that is closely related to the other corporation by reason of paragraph 128(1)(a) of the Act, or of a corporation referred to in clause (A) or (B), or

      • (II) a corporation not less than 90% of the total value and number of all specified shares of which are owned by employees referred to in subclause (I),

      where the specified shares of the other corporation, or of the corporation referred to in subclause (II), as the case may be, that are owned by employees are shares that cannot be traded on a stock exchange and the ownership of which by an employee arose in respect of the employment of the employee, or

    • (D) is held in trust for the benefit of the other corporation or of an employee referred to in subclause (C)(I) and cannot be traded on a stock exchange and the beneficial ownership of which by the employee arose in respect of the employment of the employee,

    represents not less than 90% of the total value and number of all specified shares of the other corporation, and

  • (ii) the total value and number of all specified shares of the other corporation, each of which is owned by a corporation referred to in clause (i)(A) or (B), represents not less than 50% of the total value and number of all specified shares of the other corporation; or

• (b) where the total value and number of all specified shares of the other corporation, each of which is owned by

  • (i) the particular corporation,

  • (ii) a corporation that is closely related to the particular corporation by reason of paragraph 128(1)(a) of the Act, or

  • (iii) a corporation that is a prescribed corporation in relation to the particular corporation by reason of paragraph (a),

  represents not less than 90% of the total value and number of all specified shares of the other corporation.