Section 167 Election Cash at Closing Calculator
Days from closing on an asset purchase. Work out whether the 90% test is met, how much HST you must fund on the closing date without the election, how many months until you get it back, and when the GST44 is due.
cash at closing
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Does the Election Apply
| Condition | Requirement | Your Position |
|---|
Cash at Closing, Both Ways
| Item | With the Election | Without It |
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When the Money Comes Back
| Item | Detail |
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Before the Closing Date
| Action | Why |
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Points That Decide This
What to Do Next
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Disclaimer: The election under section 167 of the Excise Tax Act, made jointly on Form GST44, allows a supply of a business or part of a business to be made without GST/HST where the conditions are met. Those conditions include that the supplier is supplying a business or part of a business that was established or carried on by the supplier, that the recipient acquires ownership, possession or use of all or substantially all of the property that can reasonably be regarded as necessary for the recipient to be capable of carrying on the business or part, and that both the supplier and the recipient are registrants where the supplier is a registrant. The CRA generally interprets all or substantially all as 90% or more. The election does not apply to a supply of a service rendered by the supplier, to property supplied by way of lease, licence or similar arrangement in certain circumstances, or to a supply of real property to a recipient who is not a registrant, and other exclusions apply. The election is filed by the recipient with the return for the reporting period in which the acquisition occurred, and the due date of that return is the operative deadline. Where the election does not apply, GST/HST is payable in the ordinary way at 13% in Ontario on the taxable supplies, and the recipient generally claims a corresponding input tax credit in its return for the period, subject to the documentary and eligibility requirements. Registration must be in place at the appropriate time and a purchaser corporation newly incorporated for the transaction is frequently not yet registered. Where real property is carved out of the election, a registrant recipient may be required to self-assess. Whether the conditions are met in a particular transaction is a question of fact that should be determined before closing. This page is general information, not tax advice.
The Tax Washes Out. The Cash Does Not.
Everyone understands that the HST on an asset purchase comes back as an input tax credit. That is true and it is not the point.
The point is that you have to find it on the closing date, and you get it back one to four months later. On a nine hundred thousand dollar deal that is one hundred and seventeen thousand dollars you need in the account on a specific Tuesday, on top of everything else you are funding.
| On a $900,000 Asset Purchase | Amount |
|---|---|
| HST at closing without the election | $117,000 |
| With a valid section 167 election | Nil |
| Recovered later as an input tax credit | The same $117,000 |
| What it costs you to bridge | Interest, plus the arranging |
Deals fall over on this more often than they should. The financing is arranged for the purchase price, the HST is discovered late, and there is no facility for it. A buyer who assumed the election would apply and finds out otherwise a week before closing has a genuine problem.
Both Parties Have to Be Registrants
This is the condition that fails most often, and it fails in a predictable way. The buyer is a newly incorporated company formed for the transaction, and it is not registered for GST/HST yet.
Nobody thinks about it because registration is easy and free. It is also not instant, and it needs to be in place at the right time rather than sorted out afterwards.
Register the newco the week it is incorporated, not the week of closing. It is a fifteen minute job that removes the single most common reason this election is unavailable, and there is no downside to being registered early.
Ninety Percent of What Is Necessary
The recipient must acquire all or substantially all of the property that can reasonably be regarded as necessary to be capable of carrying on the business, which the CRA generally reads as ninety percent.
The test is about what is necessary to carry on the business, not a simple percentage of the price. A deal where the vendor keeps a vehicle and some office furniture is fine. A deal where the vendor keeps the customer list, or the premises lease, or the equipment that does the actual work, is a different question entirely.
- Excluded assets that do not matter: personal items, a vehicle, surplus furniture
- Excluded assets that do matter: the lease, key equipment, customer relationships, licences
- Real property has its own treatment and is often carved out
- Services rendered by the supplier are outside the election
Real Property Is Usually Separate
Where the deal includes a building, real property is generally dealt with outside the election. A registrant purchaser will typically self-assess rather than pay tax to the vendor, which produces the same cash flow benefit by a different route.
That is worth confirming rather than assuming, because getting it wrong on a property produces a large number and land transfer tax is sitting alongside it.
The Deadline Is the Purchaser’s Return
The election is filed by the recipient with the return for the reporting period in which the acquisition occurred. So the deadline is the due date of that return, which depends on your filing frequency.
| Purchaser’s Reporting Period | Practical Deadline |
|---|---|
| Monthly | One month after the month of closing |
| Quarterly | One month after the quarter of closing |
| Annual | Three months after the fiscal year of closing |
Do not let the filing deadline become the working deadline. The election is a joint one, and chasing a vendor’s signature after closing is far harder than getting it before. Have the form signed by both parties at closing and file it when the return is due.
Get It Into the Agreement
The agreement should say the parties will jointly elect, that both will be registrants at closing, and who bears the HST if the election turns out not to apply. That last clause is the one nobody drafts and the one that matters when something goes wrong.
- Verify both registrations in the CRA registry, with screenshots dated
- Confirm the 90% test against what the vendor is actually keeping
- Sign the GST44 at closing while everyone is in the room
- Decide the real property treatment separately and in writing
- Include a fallback clause on who funds the HST if the election fails
- File with the right return for the period of acquisition
When the Election Is Not Available
If a condition genuinely cannot be met, the answer is not to elect anyway and hope. An invalid election means HST was payable, was not charged, and the CRA can assess it with interest, at which point the vendor and purchaser are arguing about who bears it.
Where the election is unavailable, plan the cash instead. Arrange the bridge, tell the lender the number, and get the return filed promptly so the credit comes back as fast as the rules allow.
Settle this two weeks before closing, not two days. Our GST/HST service covers the election, the registration and the return that claims the credit.
What This Calculator Does Not Cover
- Whether the conditions are met on your specific facts
- The purchase price allocation, which is a separate exercise
- Land transfer tax and other closing costs
- Share purchases, where none of this arises
- Assumed liabilities and their treatment
- Provinces other than Ontario
Frequently Asked Questions
Common questions on the section 167 election at closing.
Related Calculators and Guides
More tools for an asset purchase.
Settle This Two Weeks Before Closing
Send us the asset list and both registration numbers. We will confirm whether the election applies, prepare the GST44 for signature at closing, and file the return that claims the credit if it does not.