Sale-leaseback arrangements

When you purchase property from a person who does not have to collect tax on the sale, and you immediately lease the property back to that person, the amount of GST/HST calculated on the lease payment is determined by deducting the amount paid or credited for the sale from the lease payments. The total purchase credit is usually spread evenly over the number of lease payments.

When there is no change in the number of lease payments, you determine the purchase credit for each lease payment at the beginning of the lease by dividing the sale price of the property by the number of lease payments. The maximum credit you can deduct from any one lease payment is the amount necessary to bring that payment to zero.

When there is a renewal, variation, or early termination in a lease that changes the number of lease payments, or when the lease is assigned to a new lessor but the lessee and the property remain the same, you recalculate the amount that you may credit against each lease payment. When a lessee exercises an option to purchase the property, you can deduct any unused purchase credits from that purchase price up to the amount of the purchase price.