Closely Related Corporations (GST/HST) Regulations

3 For the purposes of paragraph 128(1)(b) of the Act, a corporation (in this section referred to as the “other corporation”) is a prescribed corporation in relation to a particular corporation if

• (a) it is the case that

  • (i) the total value and number of all specified shares of the other corporation, each of which

    • (A) is owned by the particular corporation,

    • (B) is owned by a corporation that is closely related to the particular corporation by reason of paragraph 128(1)(a) of the Act,

    • (C) is owned by

      • (I) an employee of the other corporation, of a corporation that is closely related to the other corporation by reason of paragraph 128(1)(a) of the Act, or of a corporation referred to in clause (A) or (B), or

      • (II) a corporation in respect of which employees referred to in subclause (I) hold qualifying voting control and own not less than 90% of the total value and number of all specified shares,

      where the specified shares of the other corporation, or of the corporation referred to in subclause (II), as the case may be, that are owned by employees are shares that cannot be traded on a stock exchange and the ownership of which by an employee arose in respect of the employment of the employee, or

    • (D) is held in trust for the benefit of the other corporation or of an employee referred to in subclause (C)(I) and cannot be traded on a stock exchange and the beneficial ownership of which by the employee arose in respect of the employment of the employee,

    represents not less than 90% of the total value and number of all specified shares of the other corporation,

  • (ii) the total value and number of all specified shares of the other corporation, each of which is owned by a corporation referred to in clause (i)(A) or (B), represents not less than 50% of the total value and number of all specified shares of the other corporation; and

  • (iii) the particular corporation would hold qualifying voting control in respect of the other corporation if the particular corporation were to own

    • (A) all of the issued and outstanding specified shares of the capital stock of the other corporation that are included in clauses (i)(A) to (D), and

    • (B) all of the issued and outstanding shares of the capital stock of the other corporation that are not specified shares and that would be included in clauses (i)(A) to (D) if they were specified shares; or

• (b) qualifying voting control in respect of the other corporation is held by, and not less than 90% of the total value and number of all specified shares of the other corporation are owned by,

  • (i) the particular corporation,

  • (ii) a corporation that is closely related to the particular corporation by reason of paragraph 128(1)(a) of the Act,

  • (iii) a corporation that is a prescribed corporation in relation to the particular corporation by reason of paragraph (a), or

  • (iv) any combination of the corporations referred to in subparagraphs (i) to (iii).