27 February 2020 CBA Roundtable, Q.24

Example 1 in Policy Statement P-051R2 indicates that a non-resident lessor (with a leasing business outside Canada) is considered to be carrying on business in Canada by virtue of a sale-leaseback transaction under which it purchases a conveyance from a resident registrant, with delivery under the sale agreement and under the lease-back to the resident (who will use the conveyance partly in Canada) occurring in Canada, notwithstanding no other significant connecting factors to Canada.

In response to a suggestion that this Example needed to be reviewed in light of s. 179(9), CRA responded (perhaps on the basis that it continued to consider the non-resident to be required to be registered):

The CRA has reviewed the leasing examples in P-051R2 and has determined that the introduction of new subsection 179(9) … does not impact the rationale or carrying on business conclusions in those examples.

Example 1 in Policy Statement P-051R2 indicates that a non-resident lessor (with a leasing business outside Canada) is considered to be carrying on business in Canada by virtue of a sale-leaseback transaction under which it purchases a vehicle from a resident registrant, with delivery under the sale agreement and under the lease-back to the resident (who will use the conveyance partly in Canada) occurring in Canada, notwithstanding no other significant connecting factors to Canada.

When asked about a variation on this example where the equipment is purchased by the non-resident from a third party (rather than the Canadian company) and is leased by the non-resident to the Canadian company, which exports the conveyance immediately after taking possession under the lease in Canada, CRA stated:

The modified facts in the scenario are not sufficiently different from the facts in scenario 1 to allow for a different conclusion regarding carrying on business. It appears based on the facts provided that Company B would be carrying on business in Canada.