Section 155 — Excise Tax Act: Non-arm’s length supplies

For the purposes of this Part, where a supply of property or a service is made between persons not dealing with each other at arm’s length for no consideration or for consideration less than the fair market value of the property or service at the time the supply is made, and the recipient of the supply is not a registrant who is acquiring the property or service for consumption, use or supply exclusively in the course of commercial activities of the recipient, if no consideration is paid for the supply, the supply shall be deemed to be made for consideration, paid at that time, of a value equal to the fair market value of the property or service at that time;

and if consideration is paid for the supply, the value of the consideration shall be deemed to be equal to the fair market value of the property or service at that time. Subsection (1) does not apply to a supply of property or a service by a person where an amount is deemed under section 173 to be the total consideration for the supply; or in the absence of subsection (1), the person, because of subsection 170(1), would not be entitled to claim an input tax credit in respect of the acquisition or importation of the property or service by the person, subsection 172(2) would apply to the supply, or the supply would be an exempt supply included in Part V.1 or VI of Schedule V.