RESOURCES

In a previous blog post, we looked at the option for a Seller to accept an indemnity from a Buyer to self-remit for HST post-closing instead of collecting HST from the Buyer and remitting said HST to the appropriate governing body (HST Remittance on a Commercial Sale – Part One –)

In this blog post, we will cover in further detail some of the other key items that are important to consider when accepting HST indemnity from the Buyer for the HST self-remittance.

When provided with the HST registration number of the Buyer as part of the Buyer’s indemnity to self-remit for HST post-closing, prior to completion of the transaction, the onus is on the Seller to verify that the HST number provided by the Buyer is active and matches the named Buyer in the government records.

Furthermore, as established in the 2017 case of 2252493 Ontario Limited v. The Queen¸ in the event the Agreement of Purchase and Sale (the “APS”) was assigned by the original buyer to the end-user, in order for the HST indemnity to be valid the end-user buyer that is providing the HST indemnity needs to satisfy the following criteria as well:

• evidence of the fact that the bare trustee and agency relationship existed between the end user and the original buyer at the time the APS assignment was executed;
• evidence that the purported principals or beneficiaries of the end-user existed when the APS assignment was executed; and
• evidence of a trust agreement in place between the trustee and beneficiary in relation the property acquisition.

If the above criteria are not met, the HST indemnity being provided by a Buyer could be deemed as invalid by the appropriate governing body as a result of which the Seller could find themselves liable for their failure in collecting the required HST and remitting same to the appropriate governing body at the time the transaction was completed.

For more information about this topic, please feel free to contact one of our lawyers! Reach out to us at (905) 270-6660 or by email at [email protected]. 

Please note that it is very important to discuss all the tax implications of such transactions with your accountant / licensed tax advisors so that they may cover any non-legal aspects of this matter that our office does not advise on.

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Taimoor Qureshi is a Junior Partner at Kormans LLP. You can reach Taimoor anytime at [email protected].

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