A plain-language guide to the section 167 election that removes HST from the sale of an Ontario business, and when it applies.
⚖️ This is general information, not legal advice. It can't account for your specific situation. Use it to get oriented, then confirm the details with a licensed Ontario lawyer.
Selling the assets of a business would normally mean charging HST on the sale like any other transaction. Section 167 of the Excise Tax Act lets a seller and a buyer jointly elect out of that result where the buyer is acquiring all or substantially all of what is needed to carry on the business. Getting the election right, and filed on time, avoids an unnecessary cash-flow cost for the buyer and a dispute with the Canada Revenue Agency for both sides later.
What the election does
Without the election, a sale of business assets is a taxable supply and HST applies to the price. The section 167 election treats the sale as if no HST-taxable supply occurred, so the buyer does not pay HST on the assets covered by the election and the seller does not collect it. It does not apply to a share sale, since selling shares is generally not subject to HST in the first place.
When it is available
- The buyer must be acquiring an established business, or part of one capable of operating on its own
- The buyer must be acquiring all or substantially all of the property needed to carry on that business
- The seller is usually a registrant for HST purposes; special rules apply if not
- Both parties must be registrants, or become registered, for the election to be valid
- The election does not by itself decide what qualifies as substantially all; the CRA's own guidance and past rulings inform that judgment
How and when to file
Both the seller and the buyer sign the prescribed election form, and the buyer files it with its HST return for the reporting period in which the sale closed. The seller should keep a signed copy; if the buyer misses the filing deadline, the Canada Revenue Agency can treat the sale as taxable after the fact.
If the sale includes property that would not otherwise qualify, such as a mix of business assets and an unrelated investment, work out with your accountant which parts the election actually covers before assuming everything is included.
What can go wrong
- The buyer is not yet registered for HST at closing, and registration is not backdated in time
- Only part of the business is sold, and the remaining assets do not amount to substantially all of what is needed to operate
- The election form is signed but never filed with the buyer's return
- The parties assume the election covers real property included in the sale without confirming it
- No one checks whether retail sales tax or other Ontario-specific clearances still apply alongside the HST question
Where this fits in the sale
The election is negotiated and agreed in the purchase agreement, usually as a condition or a mutual covenant, well before closing. It has no bearing on whether the deal is an asset sale or a share sale; it only matters once assets are actually changing hands. Confirm the election's availability with your accountant before relying on it in pricing discussions.
How Treadstone Law can help
The section 167 election is a filing detail, not a negotiating point, but a missed filing turns into real HST owing. Confirm eligibility with your accountant early, and diarize the filing deadline as carefully as any other closing obligation.
Treadstone Law handles corporate matters on a transparent flat fee, with online intake and a real lawyer on your file, across Ontario.
- Start your file online at treadstonelaw.ca/start-file
- See flat-fee pricing at treadstonelaw.ca/pricing
- Learn more about our corporate services at treadstonelaw.ca/corporate
- Or call us: 1-844-900-1070
This is not legal advice
This guide is general information, not legal advice. Reading it does not create a lawyer-client relationship. Ontario laws and government programs change, and how the law applies depends on your specific facts. For advice about your situation, speak with a licensed Ontario lawyer. Treadstone Law is licensed by the Law Society of Ontario — reach us at 1-844-900-1070 or start a file online.