- The going-concern rule applies when the buyer gets all or substantially all of the property reasonably necessary to carry on the business.
- GST-free treatment works through a joint election by the seller and buyer, made on the prescribed form with the prescribed information.
- The election is not available where the seller is a registrant and the buyer is not, and some supplies stay taxable even with a valid election.
When you sell or buy a business in Alberta, GST can add a large cost to the deal. A federal rule in the Excise Tax Act lets a buyer and seller avoid charging tax on a qualifying sale of a going concern.
This article explains when the rule applies, how the election works, and where tax can still be payable. The details depend on your facts, so confirm them with an accountant or lawyer.
This article covers the law of Alberta.
When the going-concern rule applies
Under section 167(1) of the Excise Tax Act, the rule applies where a supplier sells a business or part of one and the buyer gets all or substantially all of the property that can reasonably be regarded as necessary to carry on that business.
Without an election, each property and service in a business sale is treated as a separate supply with a price allocated to it, so GST (5% in Alberta) can apply to the taxable parts. Alberta has no provincial sales tax.
How the election works
The exemption works through a joint election by the seller and the buyer, made in the prescribed form with the prescribed information. If the election is valid, no tax is payable on the supplies under the agreement.
The CRA form is GST44, GST/HST Election Concerning the Acquisition of a Business or Part of a Business.
If the buyer is a registrant, the buyer must file the election with the Minister by the filing deadline for its first reporting period in which tax would otherwise have become payable on the supply. The Minister may accept a later date on the buyer's application.
When the election is not available or does not cover everything
The election is not available where the seller is a registrant and the buyer is not. Even with a valid election, tax is still payable in some cases.
| Situation | Result |
|---|---|
| Seller is a registrant and buyer is not | Election not available |
| Taxable service the seller will render | Tax still payable |
| Taxable lease, licence or similar supply of property | Tax still payable |
| Taxable sale of real property to a buyer who is not a registrant | Tax still payable |
Because of these limits, the purchase agreement should say clearly what is being sold and how each part is treated for GST.
Transfers from an estate
A separate rule applies when an estate transfers a deceased person's business property to a beneficiary. Under section 167(2), no tax is payable if the beneficiary is a registrant and the property was used in the deceased's business immediately before death. The transfer must follow the will or succession laws, the beneficiary must take the property for commercial activities, and the estate and beneficiary must jointly elect.
What to do next
- Confirm whether both the seller and the buyer are registrants.
- List what is being sold and decide whether the buyer gets substantially all the property needed to run the business.
- Check for leases, licences, services or real property that may stay taxable.
- Complete form GST44 together, and note who must file it and when.
- Ask an accountant or lawyer to confirm the treatment before closing.
Frequently asked questions
Does the seller or the buyer file the GST44 election?
If the buyer is a registrant, the buyer must file the election with the Minister by the filing deadline for its first reporting period in which tax would otherwise have become payable. The Minister may accept a later date on the buyer's application.
Can we use the election if the buyer is not registered for GST?
Not where the seller is a registrant and the buyer is not. Your accountant can confirm whether the buyer needs to be registered before closing.
Is everything in the sale GST-free once we make the election?
No. Tax is still payable on a taxable service the seller will render and on a taxable lease, licence or similar supply of property. It is also payable on a taxable sale of real property where the buyer is not a registrant.
What rate of GST applies if there is no election?
Each property and service is treated as a separate supply, and GST at 5% can apply to the taxable parts in Alberta. Alberta has no provincial sales tax.
Sources
- Excise Tax Act, s.167 (Justice Laws) — Justice Laws (federal)
- CRA – Form GST44 — canada.ca
Links go to official government, court and regulator pages. The law changes — confirm you are reading the current version.
This is a buying & selling a business question
Buying or selling a business with us is from $3,148.95, tax included. Third-party fees are extra.