GST/HST Section 167 Election Clause

Summary

This clause is for use in an asset purchase agreement and is intended to address the availability of a GST/HST exemption where all, or substantially all, of the assets of a business are being purchased, provided certain conditions are met. This is one of the most important tax clauses in an asset purchase agreement as it reduces the tax obligation on the purchaser. This clause contains practical guidance, drafting notes and an alternate clause. Often, in mergers and acquisitions, GST/HST is the last topic that the parties consider. It is treated as an afterthought. However, in an asset purchase agreement, the impact of GST/HST can be significant. The vendor is generally required to collect GST/HST (where applicable) and must remit it to the Canada Revenue Agency (CRA). The purchaser will be eligible to recover the amount through the input tax credit mechanism. The GST/HST calculation can get complicated and time-consuming as each group of assets needs to be considered individually and ...