CRA finds that the transfer of non-resident ownership of an aircraft subjected the Canadian lessee to further GST the next time it imported the aircraft
We have uploaded summaries of questions posed to CRA at the February 27, 2020 CBA Commodity Tax Roundtable together with the full text of the CRA responses.
A commercial aircraft, which was owned by a non-registered, non-resident was leased to a registered Canadian-resident corporation (the “Lessee”) for use in its international transportation business, was originally delivered to Lessee outside of Canada, with Lessee then paying GST on its importation. Ownership of the aircraft is then transferred outside Canada to a non-registered non-resident purchaser while the aircraft is situate outside Canada, whereupon the lease is novated. The aircraft is delivered to Lessee under the novated lease when it is physically situated outside of Canada, following which the Lessee brings the aircraft into Canada in connection with its international transportation business.
CRA confirmed that GST would be payable under Division III of the ETA on this importation of the aircraft, i.e., the effect of the novation was that the lessee was required to pay Division III tax a second time.
Neal Armstrong. Summary of 27 February 2020 CBA Roundtable, Q.1 under Non-Taxable Imported Goods (GST/HST) Regulations, s. 3(n)(i)(A).