GST 44 Form: The Section 167 Election Guide

GST 44 is Canada Revenue Agency Form GST44, the joint election filed under subsection 167(1) of the Excise Tax Act. It lets a buyer acquire substantially all the assets of a business without paying GST or HST on the transfer. Both the buyer and the seller must generally be GST/HST registrants, and they must make the election jointly in respect of the supply.

For an Ontario asset sale priced at $5 million, the GST 44 election can mean the difference between writing a closing cheque that includes $650,000 in HST and writing one that does not. The election does not change the income-tax treatment of the deal, and it does not erase HST on every asset. What it does is remove a cash-flow drag that would otherwise sit on the buyer's books for at least one reporting period. Done correctly, the election is a small piece of paper that protects six figures.

This guide walks through how the GST 44 election works, who qualifies, what "all or substantially all" actually means in CRA practice, the real-property carve-out, the filing mechanics that changed in 2014, and the due-diligence traps that catch both sides in Ontario asset sale transactions.

What Is the GST 44 Election?

The GST 44 election is a joint election made under subsection 167(1) of the federal Excise Tax Act (ETA), the statute that governs GST and HST in Canada. When a supplier sells a business, or part of a business that can operate as a separate business, to a recipient, and certain conditions are met, the parties may elect to have no GST or HST apply to the transfer of the assets.

Mechanically, the election treats the consideration paid for the covered assets as nil for GST/HST purposes only. The income-tax treatment, the capital cost allowance recapture, the goodwill characterisation, and any provincial land transfer tax obligations are unaffected. The GST 44 election is a GST/HST relief mechanism, not a general tax-free rollover.

Two structural features matter. First, this is a joint election. Both the buyer (the recipient) and the seller (the supplier) sign the form, and both have to qualify. Second, the election applies only where the recipient is acquiring ownership, possession, or use of all or substantially all the property that can reasonably be regarded as necessary for the recipient to be capable of carrying on the business. That phrase carries most of the legal weight.

Who Qualifies for the GST 44 Election: The Registrant Requirement

The general rule is that both the buyer and the seller must be registered for GST/HST at the time of the supply. A supply, for these purposes, is the transfer of the business assets, which generally crystallises at closing.

There is an important exception. Subsection 167(1) allows the election where the recipient (the buyer) is acquiring all or substantially all the property used in commercial activities even if the seller is a non-registrant, as long as the buyer is itself a registrant. This is the scenario most often seen when a sole proprietor under the $30,000 small-supplier threshold sells the business to an incorporated buyer that is registered. The HST election form is still available, but the analysis of the 90 percent test (discussed below) becomes more important. The buyer is now relying on the election against CRA without a registrant counterparty.

Verifying registrant status is a due-diligence step that gets skipped more often than it should. A diligent buyer's counsel will:

Run the seller's name and BN through the CRA GST/HST Registry to confirm an active registration on the closing date, not just on the signing date.
Request a copy of the seller's GST/HST registration confirmation letter.
Confirm the BN/RT account matches the legal entity actually transferring the assets, especially in groups where a parent and a subsidiary both have GST/HST accounts.

The mid-quarter de-registration trap is real. A seller who voluntarily cancels its GST/HST registration between signing and closing, because revenues have dropped below the small-supplier threshold, can unintentionally collapse the election. Build a representation and warranty into the asset purchase agreement (APA) that the seller will remain registered through closing, and require notice of any registration change as a closing condition.

The "All or Substantially All" Test: CRA's 90 Percent Threshold

The statute says "all or substantially all." CRA's administrative position, set out in GST/HST Memorandum 14.4 (Sale of a Business), is that this phrase means at least 90 percent of the property "that can reasonably be regarded as necessary for the recipient to be capable of carrying on the business."

Two parts of that sentence do a lot of work.

First, "property necessary to carry on the business" is the test, not "all property the seller happens to own." Office furniture in a head office that is not used by the business being sold is not necessary property. Personal vehicles registered to a sole proprietor and used 70 percent for personal errands are not necessary property. The analysis is functional: what assets does the buyer need to walk in on day one and operate the same business?

Second, the 90 percent threshold is an administrative position, not a statutory rule. CRA applies it; the Excise Tax Act itself uses the phrase "all or substantially all." For most Ontario deals, the 90 percent figure is the practical benchmark, and parties should document compliance with it.

Property usually included in the "necessary" pool:

Inventory and work-in-progress
Equipment, furniture, and fixtures
Goodwill and customer lists
Intellectual property used in the business (trademarks, software, know-how)
Assigned customer and supplier contracts
Leasehold interests

Property usually excluded or treated separately:

Cash and cash equivalents (typically excluded; the buyer is acquiring an operating business, not the seller's bank balance)
Accounts receivable (often kept by the seller or assigned under a separate s. 22 Income Tax Act election)
Excluded contracts (litigation, related-party agreements, certain employee bonuses)
Real property (treated under a separate analysis, discussed below)

Calculating the 90 percent. CRA's standard approach is to compare the fair market value of the necessary property being transferred to the fair market value of all property necessary to carry on the business. The APA schedules should set out the included and excluded assets clearly. A CRA auditor, working from the closing documents two years later, should be able to reconstruct the calculation.

The Real Property Exception to the GST 44 Election

Real property has its own GST/HST framework, and the GST 44 election does not paper over it.

A taxable supply of real property is collected by the recipient through self-assessment under subsection 221(2) of the Excise Tax Act in defined circumstances (most commonly, supplies of real property to a GST/HST registrant), rather than by the supplier through the ordinary collection rule in section 221. If the buyer is a GST/HST registrant acquiring real property for use primarily (more than 50 percent) in commercial activities, the buyer self-assesses HST and immediately claims a matching input tax credit (ITC). The net cash effect is nil.

That mechanism works whether or not a GST 44 election is in place. Where the election does help is on the non-real-property assets transferred at the same time: inventory, equipment, goodwill, contracts. Those are the assets the section 167 election covers.

In Ontario, where HST runs at 13 percent, the real-property analysis is material. On a $4 million building bundled into an asset sale, the buyer is self-assessing $520,000 of HST and claiming a $520,000 ITC. The numbers are large enough that the file needs to be set up carefully, even though the net cash to government is zero. If the buyer's primary use is not commercial (for example, a mixed-use residential or rental property), the ITC entitlement drops and real cash flows to CRA.

Form GST60 is the self-assessment return used by non-registrants acquiring real property. Registrant buyers self-assess in their regular GST/HST return for the period of acquisition.

Filing the GST 44 Form: Who, When, and How

This is where many practitioners get nervous, and where the rules changed in 2014.

The traditional rule was that the purchaser (the recipient) had to file Form GST44 with CRA on or before the due date of the GST/HST return for the reporting period in which the acquisition occurred. After 1 January 2014, CRA's administrative practice no longer requires automatic filing for elections under subsection 167(1) made after that date. The form is signed by both parties and retained on file, and CRA can request it during an audit.

That sounds easier than it is. In Ontario M&A practice, most experienced counsel still complete the GST 44 form at closing for two reasons. First, having both parties sign at the deal table creates a contemporaneous record that there was a joint election. Reconstructing intent two years into a CRA audit, when the seller has wound up and the buyer's controller has moved on, is much harder than producing a signed form from the closing binder. Second, holding the executed form on file with the closing documents costs nothing and removes a foreseeable audit-friction point.

What the GST 44 form requires:

Names and addresses of the buyer and the seller
Business Numbers (BNs) and GST/HST account extensions (RT0001, RT0002, etc.) for both parties, where applicable
Effective date of the acquisition (almost always the closing date)
A description of the supply that is the subject of the election
Signatures of authorised representatives of both parties

The form does not need to list every asset. The APA schedules carry that detail.

Joint and Several Liability: What Happens If the Election Is Invalid

If CRA later concludes that the section 167 conditions were not met, the consequence is that the original supply was a taxable supply on which GST/HST should have been collected. CRA can assess for the unpaid tax, interest, and in some cases penalties under section 296 of the Excise Tax Act. The normal assessment period for GST/HST is four years from the later of the date the return was filed and the date the return was required to be filed.

The default liability framework starts with the seller. Section 221 obliges a registrant supplier to collect GST/HST on taxable supplies, and CRA will typically pursue the seller first. In practice, a buyer is rarely insulated. If the seller has been wound up, has distributed proceeds to shareholders, or is insolvent, CRA's collection efforts will look elsewhere. The buyer may also be assessed under certain anti-avoidance rules. Either way, the buyer will have wanted an indemnity from the seller that the seller may no longer be in a position to honour.

The drafting response is straightforward. The APA should include:

A specific tax indemnity from the seller covering any GST/HST reassessment arising from the election.
An escrow or holdback that survives long enough to cover the assessment period (typically 24 to 48 months, sometimes longer for higher-risk facts).
A representation that the seller is a registrant and will remain so through closing.
A covenant to cooperate on any CRA audit.

Due-Diligence Pitfalls and Drafting Traps

The following catch even careful counsel.

Active registration on closing day. Confirm GST/HST registration is active on the actual closing date, not just on signing. A seller who has cancelled registration in the interim, or whose registration has been cancelled by CRA for non-filing, can take the election down.

BN/RT account matching the transferring entity. Asset sales sometimes transfer assets from a subsidiary while the parent's BN is the registered account. Check that the entity signing the bill of sale is the entity registered for GST/HST.

Partial business sales. The 90 percent test applies to the business being transferred, not the entire enterprise. Selling one division of a multi-division company is permissible under section 167, but the division must itself be capable of operating as a separate business. The assets transferred must constitute at least 90 percent of what the buyer needs to run that division. CRA scrutiny on partial sales tends to be heavier.

Excluded liabilities and contracts. Asset purchase agreements typically exclude certain liabilities, related-party contracts, and litigation files. Each exclusion erodes the 90 percent calculation. Track them.

Real property bundled with an operating business. Do not assume the section 167 election covers the real estate transfer. Run the s. 221(2) self-assessment analysis separately.

Companion elections. A section 22 Income Tax Act election (separate from the Excise Tax Act) covers accounts receivable for income-tax purposes. A section 22 Excise Tax Act election exists for GST/HST treatment of accounts receivable. Coordinate both with the GST 44 election as part of the closing package.

Non-resident buyers. A non-resident buyer that wants to claim the GST 44 election should generally register for GST/HST in Canada before closing. Registration is not automatic, and the lead time to obtain a BN and GST/HST account can be several weeks.

How GST 44 Fits Inside an Asset Sale

The GST 44 election is one piece of a much larger asset-sale closing package. In a typical Ontario deal, the closing binder includes the asset purchase agreement, bills of sale, assignments of contracts and leases, IP assignments, the section 22 ITA election for receivables, the GST 44 election, employee transfer documents, real-property conveyances and PPSA discharges where applicable, and corporate authorisation resolutions. The election is a five-minute conversation at the deal table that depends on weeks of due diligence.

A note on share sales: GST 44 is not relevant in a share sale. The sale of shares is an exempt financial supply for GST/HST purposes under Part VII of Schedule V to the Excise Tax Act. There is no GST/HST on the share transfer, so no election is needed. The decision to structure a deal as an asset sale or a share sale turns on factors other than HST, including income-tax treatment, liability transfer, and contract assignment risk. For more on that decision, see our practice page on asset sale transactions and our corporate tax law hub.

Frequently Asked Questions

What is the GST 44 form used for?

The GST 44 form is the joint election under subsection 167(1) of the Excise Tax Act used when a business is sold as a going concern. It allows the buyer to acquire substantially all the assets of the business without paying GST or HST on the transfer. Both parties sign, and the buyer retains the form.

Do you have to file Form GST44 with CRA?

Generally no, for elections made after 1 January 2014. CRA's administrative practice is that the form is signed by both parties and retained on file, then produced if CRA requests it during an audit. Most Ontario M&A counsel still complete the form at closing to create a contemporaneous record.

What is the 90 percent rule for the GST 44 election?

CRA's administrative position is that "all or substantially all" in subsection 167(1) means at least 90 percent of the property necessary for the buyer to carry on the business. The threshold is measured on a fair-market-value basis and applies to property reasonably required to operate the business, not to every asset the seller owns.

Does the GST 44 election remove HST on real property?

Not directly. Real property follows a separate framework under section 221(2) of the Excise Tax Act. A registrant buyer acquiring real property for primarily commercial use self-assesses HST and claims a matching input tax credit, producing nil net cash to CRA. The GST 44 election covers the non-real-property assets transferred in the same deal.

Can a non-registrant seller use the GST 44 election?

Yes, in limited circumstances. Subsection 167(1) allows the election where the buyer is a GST/HST registrant acquiring all or substantially all the property used in commercial activities, even if the seller is not registered. This typically arises when a small supplier under the $30,000 threshold sells an operating business to a registered buyer.

Does Form GST44 apply to a share sale?

No. The sale of shares is an exempt financial supply for GST/HST purposes under the Excise Tax Act, so no GST or HST is charged on a share transfer in the first place. The section 167 election and Form GST44 only apply to asset sales where business assets are being transferred from one entity to another.

Sources & Official Resources

Federal Statutes Cited

CRA Forms and Guidance 7. Form GST44, GST/HST Election Concerning the Acquisition of a Business or Part of a Business 8. Form GST60, GST/HST Return for Acquisition of Real Property 9. CRA GST/HST Memorandum 14.4, Sale of a Business or Part of a Business

Contact Hadri Law

Buying or selling a business in Ontario is one of the most consequential transactions a business owner will sign. The GST 44 election is a small piece of paper that can protect six figures in HST cash flow, but only if the registrant analysis, the 90 percent calculation, and the real-property treatment have been worked through before closing.

Hadri Law's corporate, commercial, and tax team advises Ontario buyers and sellers through asset sale and share sale transactions, including the GST 44 election, the section 22 Income Tax Act election, real-property self-assessment, and the tax indemnity package that protects the deal after closing. Our founder, Nassira El Hadri (Law Society of Ontario, 2021), works alongside corporate lawyer Nicholas Dempsey, who has advised on more than 90 asset and share sale transactions, and tax lawyer Martina Caunedo, who brings over a decade of international tax experience to CRA audits and Tax Court matters.

We offer a free initial consultation and serve clients in English, French, Spanish, and Catalan.

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This article is for general information only and does not constitute legal advice. Reading or relying on it does not create a solicitor-client relationship with Hadri Law Professional Corporation.

GST 44 (Form GST44): The Section 167 Election for the Sale of a Business

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