Section 220.06

Subsection 220.06(1)

Administrative Policy

23 March 2017 CBA Commodity Taxes Roundtable, Q.15

lessee engaged in HST-exempt activities can be subject to double HST on equipment which it imports then subsequently purchases from the non-resident lessor

An Ontario private vocational college leases equipment from a non-registered European supplier, with the equipment being delivered to it outside Canada and imported by it. As a result, the college pays non-refundable tax: 5% GST under s. 212.1; and self-assessed Ontario HST under s. 220.07.

After one year, the college exercises its option under the lease terms to purchase the equipment for its amortized value (of $800,000), so that s. 136.1(1.1) deems it to have received delivery in Ontario of the equipment by way of sale, thereby triggering Ontario HST under s. 220.06. S. 11 of the New Harmonized Value-Added Tax System Regulations provides an exemption where “the supply is made by a person that paid tax under section 220.05 or 220.07 … in respect of bringing the property into the participating province.”

The reference to the supplier having paid the tax does not work in a case where the recipient was liable to pay the tax under s. 220.07. Is this the intention? CRA responded:

Based on the information provided, we agree with the conclusion that tax would apply under section 220.07 of the ETA, and then under section 220.06 of the ETA based on the exercising of the option to purchase the equipment. We have made the Department of Finance Canada aware of the tax policy issue that is raised by this situation.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 220.07 - Subsection 220.07(1) double HST where equipment imported by lessee in then purchased by it 93
Tax Topics - Excise Tax Act - Section 136.1 - Subsection 136.1(1.1) s. 220.06 engaged when lessee exercises purchase option on equipment leased and imported form non-resident lessor 94