Question 1

What is the GST/HST section 167 election for business sales in Canada?

Accepted Answer

Under section 167 of the Excise Tax Act, if the buyer acquires all or substantially all (at least 90%) of the assets needed to carry on the business, both parties can jointly elect to have no GST/HST payable on the sale by filing CRA Form GST44.

Question 2

Do I need to allocate the purchase price among asset classes?

Accepted Answer

Yes, the CRA requires the purchase price to be allocated among asset categories such as inventory, equipment, and goodwill for income tax and capital cost allowance (CCA) purposes. Both parties must report the same allocation on their tax returns.

Question 3

Is the Bulk Sales Act still in effect in Canada?

Accepted Answer

No. Ontario was the last province with bulk sales legislation and repealed its Bulk Sales Act in 2017. No Canadian province currently has bulk sales legislation in effect.

Question 4

What is a PPSA search and why is it important?

Accepted Answer

A PPSA (Personal Property Security Act) search checks whether any liens or security interests are registered against the business assets. Buyers should conduct this search to ensure the assets are free of encumbrances before completing the purchase.

Question 5

Are non-compete clauses enforceable in Canadian business sales?

Accepted Answer

Yes, Canadian courts are more willing to enforce non-compete clauses in the context of business sales compared to employment relationships, provided the restrictions are reasonable in duration, geographic scope, and the activities restricted.

Bill of Sale — Business (Canada)

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