A Goods and Services Tax/Harmonized Sales Tax (GST/HST) rule, commonly referred to as the “holding corporation rule”, generally allows a parent corporation to claim input tax credits to recover GST/HST paid in respect of expenses that relate to another corporation. This rule provides that, where a parent corporation resident in Canada incurs expenses that can reasonably be regarded as being in relation to shares or indebtedness of a commercial operating corporation (a corporation all or substantially all of the property of which is for consumption, use or supply in commercial activities) and the parent corporation is related to the commercial operating corporation, the expenses are generally deemed to have been incurred in relation to commercial activities of the parent corporation.
The Federal Government intends to consult on certain aspects of the holding corporation rule, particularly with respect to the limitation of the rule tocorporations and the required degree of relationship between the parent corporation and the commercial operating corporation. At the same time, the Government intends to clarify which expenses of the parent corporation that are in respect of shares or indebtedness of a related commercial operating corporation qualify for input tax credits under the rule.
Consultation documents and draft legislative proposals regarding these issues will be released for public comment in the near future. If you have anything to say please contact us.
The Federal Government intends to consult on certain aspects of the holding corporation rule, particularly with respect to the limitation of the rule tocorporations and the required degree of relationship between the parent corporation and the commercial operating corporation. At the same time, the Government intends to clarify which expenses of the parent corporation that are in respect of shares or indebtedness of a related commercial operating corporation qualify for input tax credits under the rule.
Consultation documents and draft legislative proposals regarding these issues will be released for public comment in the near future. If you have anything to say please contact us.