The HST rate in Ontario has increased from 5% to 13% which means the risk exposure has increased on transactions where HST should be charged. An area of particular concern is payments to related parties, to ensure that circumstances qualify where no tax is collected on the transaction.

One of the most commonly used elections between closely related corporations and Canadian partnerships to treat certain taxable supplies as having been made for nil consideration.  The HST to be collected and remitted on qualifying transactions would therefore be nil since the consideration is nil.  This is an effective provision to avoid the cash flow associated with charging HST and is typically used with intercompany management fees. 

However, the election can only be used in certain circumstances, where form GST25 has been completed (but not required to be filed with CRA) and:

Two corporations are closely related if at least 90% of the capital stock of one corporation is owned by:

• the other corporation
• a sub of the other corporation
• or a combination of subsidiaries of corporations

The election is not available where two corporations are held by the same individual. 

Another election which is commonly used the tax free transfer of assets of a business.  Typically this election is utilized in a transfer of business assets from an individual to a corporation in exchange for shares.

In most other cases, the transfer of assets is considered a taxable transaction.