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Can a non active Canadian company that only collects interest and dividends claim back the GST and PST (Quebec) paid out on invoices for accounting services, phone bill, etc.

By Gord Ahier |

Andy asked:

Can a non active Canadian company that only collects interest and dividends claim back the GST and PST (Quebec) paid out on invoices for accounting services, phone bill, etc.

Gord Ahier answered:

In general, Canadian holding corporations that do not carry on commercial activity are not eligible to register for GST and are therefore not able to claim input tax credits ("GST paid out on invoices for accounting services , phone bill etc"). However, if the holding corporation holds shares or debt of a related corporation and all or substantially all (more than 90 per cent) of the related corporation's assets are used in its commercial activities, then the holding corporation would also be eligible to register for GST. In practice, since only the portion of the holding corporation's operating expenses that directly relate to maintaining its investment in the related corporation are deductible, we do not advise that the holding corporation register for GST as the benefits generally do not outweigh the costs.

Two corporations are related if:

  • they are controlled by the same person or group of persons;
  • each of the corporations is controlled by one person and the person who controls one of the corporations is related to the person who controls the other corporation;
  • one of the corporations is controlled by one person and that person is related to any member of a related group that controls the other corporation;
  • one of the corporations is controlled by one person and that person is related to each member of an unrelated group that controls the other corporation;
  • any member of a related group that controls one of the corporations is related to each member of an unrelated group that controls the other corporation; or
  • each member of an unrelated group that controls one of the corporations is related to a least one member of an unrelated group that controls the other corporation.
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