--- title: "Section 156 Election (RC4616): GST/HST Between Related Corps" url: https://www.everstonecpa.com/blog/gst-hst-section-156-election-related-corporations description: "How the section 156 GST/HST election lets related corporations supply each other at nil consideration, who qualifies, and how to file RC4616. See how." type: guide updated: 2026-10-08 summary: "The section 156 election lets two specified members of a qualifying group treat certain taxable supplies between them as having been made for no consideration, so no GST/HST is charged. It is filed jointly on Form RC4616 and does not affect either party’s input tax credits." faq_count: 6 publisher: EverStone CPA Inc., a Chartered Professional Accountant firm registered with CPA British Columbia and CPA Alberta service_area: British Columbia, Alberta, Ontario and Manitoba language: en-CA contact: info@everstonecpa.com · https://www.everstonecpa.com/book-online --- [Home](https://www.everstonecpa.com/) [Blog](https://www.everstonecpa.com/blog) The GST/HST Section 156 Nil Consideration Election GST/HST # The section 156 election: nil GST/HST between related corporations By EverStone CPA · Updated September 2026 · 9 min read **Quick answer:** The section 156 election lets two specified members of a qualifying group treat certain taxable supplies between them as having been made for no consideration, so no GST/HST is charged. It is filed jointly on Form RC4616 and does not affect either party’s input tax credits. Every condition, or the election is not available. ## Key takeaways - Supplies between electing members are treated as made for **nil consideration** — no GST/HST charged. - Only **corporations resident in Canada and Canadian partnerships** can elect; trusts and individuals cannot. - The group must be **closely related**, generally on a 90% voting-share test. - **Input tax credits are unaffected** by the election. - Form **RC4616** must be filed by the earliest applicable GST/HST return due date — late filing is only accepted in exceptional circumstances. Two related companies, such as an opco and an equipment or management company, often invoice GST or HST to each other monthly. The tax nets out but still has to be funded, tracked and filed. Section 156 ends that circulation. ## What the section 156 GST/HST election does Subsection 156(2) of the Excise Tax Act provides a **joint election** that permits two specified members of a qualifying group to treat certain taxable supplies between them as having been made for nil consideration. The supplier then does not need to account for GST/HST on those supplies while the election is in effect. The CRA states the election does not affect the members’ right to claim [input tax credits](https://www.everstonecpa.com/blog/input-tax-credits-itc-canada-guide): subsection 141.01(7) ensures the nil-consideration deeming does not reduce how far the supplier’s inputs count as acquired for taxable supplies. You stop charging each other tax but still recover tax paid to others. **Two or more related corporations charging each other GST?** We confirm whether the section 156 election fits, file it and keep the intercompany entries clean, at a fee quoted in writing. See [how we file GST/HST](https://www.everstonecpa.com/gst-hst-filing-services), or [get a GST quote](https://www.everstonecpa.com/book-online?service=monthly#enquiry-form). [Get My Fixed Quote](https://www.everstonecpa.com/book-online?service=monthly#enquiry-form) ## Who can elect Three definitions stack on top of each other. ### A qualifying group Either a group of corporations, each member closely related within the meaning of section 128 to each other member; or a group of Canadian partnerships, or of partnerships and corporations, each closely related within the meaning of section 156. ### Closely related For corporations, paragraph 128(1)(a) requires that qualifying voting control in the other corporation is held by, and **not less than 90 per cent of the value and number of the issued and outstanding shares having full voting rights under all circumstances** are owned by, the particular corporation or a defined chain of qualifying subsidiaries. Common ownership by the same individual is not, on its own, enough — the test looks at ownership within the corporate chain. **This is a different test from the one you know from income tax.** Corporations that are [associated for small business deduction purposes](https://www.everstonecpa.com/blog/associated-corporations-small-business-deduction) are not automatically closely related for GST/HST. Two companies each wholly owned by the same person are associated, but that alone does not satisfy section 128. ### A specified member A specified member of a qualifying group is either a qualifying member or a temporary member. A **qualifying member** is a registrant that is a corporation resident in Canada or a Canadian partnership, is a member of the group, is not a party to an election under subsection 150(1). It must also meet one of three property-and-supply tests: it has property and last acquired all or substantially all — generally 90 per cent or more — of it for use exclusively in its commercial activities. The second is that it has no such property and all or substantially all of its supplies are taxable; the third, that it is a new entity reasonably expected to meet those conditions over the next twelve months. A **temporary member** is a narrow category tied to a butterfly reorganization under subparagraph 55(3)(b)(i) of the Income Tax Act, and only a corporation can be one. A specified member must in every case be a corporation or a Canadian partnership, a trust or an individual cannot be one, which rules the election out for many family structures. Not sure how this applies to you? Every group’s structure is different. Send an enquiry to a CPA and get a straight answer, plus a fixed quote before any work starts. [Send an Enquiry →](https://www.everstonecpa.com/book-online?service=monthly#enquiry-form) [See tax services](https://www.everstonecpa.com/tax-services) ## What the election does not cover Even with a valid election in place, subsection 156(2.1) keeps three categories outside it: - a supply by way of **sale of real property**; - a supply of property or a service that is **not acquired by the recipient for consumption, use or supply exclusively in the course of its commercial activities**; and - a supply made to a temporary member in the course of a butterfly reorganization where the supply is not made in contemplation of the distribution. Those supplies keep their normal GST/HST treatment. The middle bullet is the practical trap: if the recipient uses the property or service partly outside commercial activity, that supply falls outside the election even though the election is valid. ## Filing Form RC4616 The election is made jointly in prescribed form, with a stated effective day, by filing **Form RC4616**. Several elections can be filed together by appending a list of specified members; every combination named is then treated as having elected. The deadline is precise. Form RC4616 must be **received by the CRA on or before the earliest day on which an electing specified member is required to file a GST/HST return for the reporting period that includes the effective date**. Where one party has an earlier return due date, a quarterly filer electing with an annual filer, say — that earlier date governs. ### Late filing is not routine A late form is accepted only in exceptional circumstances, under the discretion in subparagraph 156(4)(b)(ii). Each request needs a written submission to the Assistant Director of Audit at the tax services office of the first specified member named on the form. Do not rely on it. ## The liability that comes with it Subsection 156(5) makes the two members **jointly and severally liable** for GST/HST obligations arising from a failure to account for or pay tax on a supply between them, including where the election has ceased to be in effect but the parties carried on as though it were. The election shares the benefit and the risk. ## Is it worth doing? For a two-company structure with regular intercompany charges, usually yes: it removes a cash-flow swing and eliminates a category of error. Where one company is not fully engaged in commercial activity, or a trust sits in the ownership chain, the answer may be no, and an invalid election is worse than none. Check ownership, then the exclusions, then the deadline. If you are still designing the structure, see [when a holding company makes sense](https://www.everstonecpa.com/blog/holding-company-canada-when-it-makes-sense) and the [GST/HST registration guide](https://www.everstonecpa.com/blog/gst-hst-registration-guide-small-business). Sources - [CRA GST/HST Memorandum 14-5 — Election to Deem Supplies to be Made for Nil Consideration](https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/14-5/election-nil-consideration.html) - [CRA GST/HST Memorandum 14-7 — Closely Related Corporations](https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/14-7/closely-related-corporations.html) - [CRA Form RC4616 — Election for a Qualifying Group](https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/rc4616.html) About this article **EverStone CPA** Prepared and reviewed by a CPA at EverStone CPA, serving businesses in BC, Alberta, Ontario and Manitoba. [About the firm →](https://www.everstonecpa.com/about) · [Send an enquiry →](https://www.everstonecpa.com/book-online?service=monthly#enquiry-form) This article is general information, not tax advice for your specific situation. Tax rules and CRA administrative positions change — confirm anything that affects a decision with the CRA or with us first. ### Keep reading [Associated corporations and the small business deduction →](https://www.everstonecpa.com/blog/associated-corporations-small-business-deduction) [When a holding company makes sense →](https://www.everstonecpa.com/blog/holding-company-canada-when-it-makes-sense) [Claiming input tax credits →](https://www.everstonecpa.com/blog/input-tax-credits-itc-canada-guide)[Put one question to a CPA →](https://www.everstonecpa.com/quick-question) FAQ ## Frequently asked questions **What does the section 156 election do?** Subsection 156(2) of the Excise Tax Act provides a joint election that permits two specified members of a qualifying group to treat certain taxable supplies between them as having been made for nil consideration. The effect is that the supplier does not have to account for GST/HST on those supplies while the election is in effect. **Does the election reduce our input tax credits?** No. The CRA states the election does not affect input tax credit claims by the electing members under the general rules. Subsection 141.01(7) ensures nil-consideration deeming does not reduce how far inputs count as acquired for taxable supplies for consideration. **Who can be a party to the election?** Only a corporation resident in Canada or a Canadian partnership can be a specified member, so a trust or an individual cannot participate. Each member of the group must be closely related to each other member, and each electing party must be a qualifying member or, in a defined reorganization, a temporary member. **What does closely related mean for corporations?** Under paragraph 128(1)(a), two corporations are closely related where qualifying voting control in respect of one is held by the other, or by a defined chain of qualifying subsidiaries, and not less than 90 per cent of the value and number of the issued and outstanding shares having full voting rights under all circumstances are owned within that group. **Which supplies are excluded from the election?** Under subsection 156(2.1), the election does not cover a sale of real property, a supply the recipient does not acquire exclusively for its commercial activities, or certain supplies to a temporary member in a butterfly reorganization. Those are taxed as if no election existed. **When must Form RC4616 be filed?** It must be completed and received by the CRA on or before the earliest day on which an electing specified member is required to file a [GST/HST return](https://www.everstonecpa.com/gst-hst-filing-services) for the reporting period that includes the day the election is to become effective. Where one party has an earlier return due date than the other, that earlier date governs. ## Running two or more related corporations? Tell us how the corporations are owned and what they bill each other. A CPA replies by email within one business day with whether the election fits and a fixed fee. [Get My Fixed Quote](https://www.everstonecpa.com/book-online?service=monthly#enquiry-form)[Book a Paid Advice Call](https://www.everstonecpa.com/advice-call) ## Have a question about this? Ask free through [the quick-question form](https://www.everstonecpa.com/quick-question); a CPA replies by email within one business day. Need a proper look? A 45-minute **Advice Call** is $225 plus GST, paid by secure link and credited to your first invoice if you become a client within 60 days. Want an accountant to take it on? [Send an enquiry](https://www.everstonecpa.com/book-online?service=monthly#enquiry-form). [Ask a Free Question](https://www.everstonecpa.com/quick-question) [Book a Paid Advice Call](https://www.everstonecpa.com/advice-call) Email info@everstonecpa.com ★★★★★ “Personal. Professional. Responsive. Plus he saved me a bundle!” Corrin Skalbeck · Google Local Guide **Run your own numbers with the free calculators:** [verify your payroll deductions](https://www.everstonecpa.com/payroll-deduction-calculator) · [estimate what you owe in GST/HST](https://www.everstonecpa.com/gst-hst-calculator) · [Incorporation savings calculator](https://www.everstonecpa.com/incorporation-calculator) [← GST/HST registration: when your business must register](https://www.everstonecpa.com/blog/gst-hst-registration-guide-small-business) [Health Spending Accounts: turning medical costs into a business expense →](https://www.everstonecpa.com/blog/health-spending-account-canada-small-business) --- Source: https://www.everstonecpa.com/blog/gst-hst-section-156-election-related-corporations Prices: https://www.everstonecpa.com/pricing · Contact: info@everstonecpa.com · https://www.everstonecpa.com/book-online