28 February 2019 CBA Roundtable, Q.24

Corporations A and B (both registered and carrying on a business) amalgamate to form AmalCo. Immediately thereafter, Corporation C, a GST/HST registered corporation, acquires all the AmalCo assets. Are Corporation C and AmalCo entitled to elect under s. 167(1) respecting that acquisition? CRA responded:

Since … Corporations A and B were the persons that established or carried on the business, AmalCo cannot be considered to have done so, since it is deemed to be a separate person for GST/HST purposes. …

[By virtue of s. 271(b)] where an amalgamation occurs for GST/HST purposes, the transfer of property or services to AmalCo by Corporations A and B under the amalgamation agreement does not constitute an acquisition made by AmalCo from those corporations, since AmalCo is deemed to be the same person and a continuation of those corporations in respect of that property or those services.

In addition, paragraph 271(c) deems the transfer of property from the predecessor corporations to the new corporation not to be a supply for GST/HST purposes.

Thus … AmalCo cannot be considered to have “acquired” a business established or carried on by another person in accordance with section 167 nor be considered the recipient of a supply of a business.

Two registrants (Corporations A and B) amalgamate to form AmalCo, which immediately thereafter sells all its assets to a registered third party. In finding that no s. 167 election could be made for this sale, CRA indicated that the supplier (AmalCo) did not satisfy the s. 167 requirement that it have “established” the business (this was done by its predecessors, who were deemed separate persons) and by assumption it also did not satisfy the requirement that it have “carried on” the business.