Subsection 136.1(1)
Administrative Policy
GST/HST Memorandum 3-3-5 “Place of Supply in a Province – General Rules for Intangible Personal Property” January 2025
Application of place-of-supply rules can change at the beginning of each lease interval
19. … [S]eparate supplies of intangible personal property that are deemed to be made for each lease interval may be subject to the GST or the HST at a different rate, to the extent that those supplies are deemed to be made in a different province based on the application of the place of supply rules for intangible personal property.
GST/HST Memorandum 3-3-4, Place of Supply in a Province – Real Property, August 2024
Supply of building for each lease interval is where the building is situate
Example 4 – Lease of real property in a particular province
Pursuant to a lease agreement, a company in New Brunswick leases a commercial office building situated in New Brunswick to a company in Ontario for a period of 10 years.
The supply for each lease interval is deemed to be made in New Brunswick since the building is situated in that province. The HST at a rate of 15% applies to each lease payment.
| Locations of other summaries | Wordcount | |
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| Tax Topics - Excise Tax Act - Section 136.2 | 338 |
7 April 2022 CBA Roundtable, Q.10
Homes in a new residential subdivision may be supplied under long-term leases, especially on First Nations lands. The “buyer” might acquire a home under a 99-year lease or sublease for a single lump sum (which might not be related to any lease intervals during the term) or for an upfront payment coupled with periodic charges. Under s. 168, the GST collectible under a lease depends on the time at which the consideration under the lease is paid or becomes payable. However, where an upfront payment is made at the lease’s inception, it may not be known whether the long-term lessee will commence to engage in short-term rentals at a future juncture.
Part #1
How does a landlord under the 99 year lease determine its obligations for collecting GST with respect to upfront and ongoing payments?
Part #2
a) If it is reasonably expected that the property will be used for residential purposes of the long-term lessee, is no GST collectible on the up front rent payment?
b) What happens if in the future the home becomes devoted exclusively to short-term rentals after being occupied for some period by the long-term lessee as a place of residence?
c) What happens if the landlord, a registrant, has filed its GST/HST returns on a timely basis, but the change to short-term rental usage has occurred beyond the limitation period applicable to the receipt of the initial upfront rent payment?
Part #1
After noting that the “determination as to whether the balance of the lease term following the upfront payment consists of only one lease interval or multiple lease intervals will depend on whether a ‘periodic charge’ made subsequent to the upfront payment is recognized as consideration for the lease of the home for GST/HST purposes,” CRA stated:
[I]f during a particular lease interval, the intent of the Long-Term Lessee is to use the home for the purpose of its continuous occupancy as a place of residence for a month or longer, that supply would be an exempt supply and the landlord would not have to collect tax on that supply. But, if during the next lease interval, the Long-Term Lessee intends to use the home to make short-term rentals, the lease of the home by the landlord to the Long-Term Lessee for the particular lease interval would be a taxable supply and, if a registrant, the landlord would have to collect tax on that supply calculated on the consideration for that supply (that is, on the particular periodic charge).
Part #2
(a) CRA indicated:
If the Long-Term Lessee will be leasing the home (that is, a residential complex) initially for the purpose of their occupancy as a place of residence and the period throughout which continuous occupancy of the home is given to the same individual under the arrangement is at least one month, the lease of the home by the landlord to the Long-Term Lessee will be an exempt supply. As such, tax is not collectible on the upfront payment.
Accordingly if the landlord was a builder of the residential complex, “this purpose should be reflected in a self-supply of the residential complex by the landlord, assuming all of the conditions in subsection 191(1) apply.”
(b )CRA indicated that, in this regard, “[i]f, at the particular time that the supply of the home is deemed to be made by the landlord under paragraph 136.1(1)(b), the intention of the Long-Term Lessee is to use the home to make short-term rentals, the lease of the home by the landlord to the Long-Term Lessee for the particular lease interval is a taxable supply and, if a registrant, the landlord would have to collect tax on that supply”.
It went on to note that there could be a resulting deemed supply by the landlord, e.g., under the s. 206 change-in-use provisions.
(c) CRA indicated that “there would be no requirement to change the tax status of the supply for which the upfront payment is attributable to, if the tax status of that supply was correctly determined at the time that the supply was deemed to be made under paragraph 136.1(1)(b).”
| Locations of other summaries | Wordcount | |
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| Tax Topics - Excise Tax Act - Schedules - Schedule V - Part I - Section 6.1 | application of s.6.1 exemption to upfront lease prepayment determined by its attribution to particular lease intervals | 206 |
28 February 2002 CBA Roundtable, Q.58
Tangible personal property located in Canada is acquired by a non-resident for lease to a resident with rentals payable on a monthly basis. Does the deeming by s. 136.1 of the monthly payments as separate supplies mean that the non-resident is carrying on business in Canada? CRA responded:
[T]he deeming of separate supplies of the property under section 136.1 would not, in itself, result in a particular person being considered to be carrying on business in Canada. However…a definitive determination of whether a particular person is carrying on business in Canada must be made based on the particular facts of the case… [P]roperty being supplied under a long-term lease is still considered as being supplied on a continuous basis regardless of the deeming rule under section 136.1 of the ETA and… the definition of a “business” includes any activity engaged in on a regular or continuous basis that involves the supply of property by way of lease.
Paragraph 136.1(1)(d)
Administrative Policy
25 May 2019 GST/HST Interpretation 185880 - Lease modification and renewal
An unregistered non-resident lessor (“Lessor”) leases equipment to a registered resident for use in the course of its commercial activities in Canada. At the start of the lease, the lessee takes possession of the equipment at the lessor’s premises outside Canada, and pays GST on its subsequent importation of the equipment into Canada.
Before the end of the lease, the lessor and lessee negotiate a lease renewal to extend the lease term. CRA indicated that this would result in a new lease agreement, even if it was only the lease term that was amended rather than any other terms such as the monthly rent, stating:
[T]he modification of the lease in respect of any of its essential elements, such as the rent or the term of the lease, would be considered a significant change that goes to the root of the agreement. These types of fundamental changes result in a new agreement between the parties and a new supply for GST/HST purposes. Accordingly, the place of supply must be established for this new supply, based on where possession or use of the tangible personal property is given or made available to the Lessee under the lease renewal agreement.
Thus, if the situs of the equipment was inside Canada at the time of the lease renewal, the place of supply of the equipment under the lease would commence to be in Canada pursuant to ss. 142(1)(b) and 136.1(1)(d), and the lease payments would commence to be taxable.
| Locations of other summaries | Wordcount | |
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| Tax Topics - Excise Tax Act - Section 142 - Subsection 142(1) - Paragraph 142(1)(b) | place of supply established by equipment situs at lease commencement until its amendment | 315 |
GST/HST Memorandum 3.3 "Place of Supply" April 2000
Situs of supply of leased property determined by place of legal delivery
19. ... T]he deterination would generally be based on where legal delivery of the property was made to the recipient under the terms of the arrangement... .
| Locations of other summaries | Wordcount | |
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| Tax Topics - Excise Tax Act - Section 142 - Subsection 142(1) - Paragraph 142(1)(a) | 304 | |
| Tax Topics - Excise Tax Act - Section 142 - Subsection 142(1) - Paragraph 142(1)(b) | 297 |
Subsection 136.1(1.1)
Administrative Policy
23 March 2017 CBA Commodity Taxes Roundtable, Q.15
An Ontario private vocational college is the lessee of equipment from a non-registered non-resident which it imported itself, thereby resulting in an obligation to self-assess Ontario HST under s. 220.07 (in addition to paying GST on the importation). A year later, it exercises an option under the lease to purchase the equipment, thereby triggering Ontario HST again under s. 220.06 in light of being deemed to have received a delivery by way of sale under s. 136.1(1.1).
CRA confirmed that this situation results in such double tax, and indicated that it has raised this anomaly with Finance.
| Locations of other summaries | Wordcount | |
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| Tax Topics - Excise Tax Act - Section 220.07 - Subsection 220.07(1) | double HST where equipment imported by lessee in then purchased by it | 97 |
| Tax Topics - Excise Tax Act - Section 220.06 - Subsection 220.06(1) | 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 | 228 |
June 2012 Draft GST/HST Technical Information Bulletin B-103
For GST/HST purposes, a recipient of a supply by way of lease, licence or similar arrangement of tangible personal property that exercises an option to purchase the property under the arrangement is, for greater certainty, deemed to take delivery of the property supplied by way of sale at the place and time at which the recipient ceases to have possession of the property as a lessee and begins to have possession of the property as a purchaser. Therefore, the place of supply rules for the sale of the tangible personal property are based on the place at which the recipient begins to have possession of the property as a purchaser rather than the place where the recipient first obtained possession of the property as a lessee.
Subsection 136.1(2)
Administrative Policy
30 August 2018 Ruling 185770
A non-resident insurer which otherwise was only making exempt (insurance policy) supplies in Canada was found to have been required to register for GST/HST purposes as a result of entering into an agreement with another party under which each agreed to provide administrative services to the other at cost, to be billed annually. ETA 136.1(2) typically deems periodically billed services to be supplied at the beginning of each billing period, so that presumably the effective date of required registration was the effective date of this administrative services agreement.
| Other locations for this summary | |
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| Tax Topics - Excise Tax Act - Section 240 - Subsection 240(1) | entering into an agreement to pool administrative support services triggered an obligation to register |
Memorandum 8-3 - "Calculating Input Tax Credits"
ITC determined on a billing period by billing period basis
74. Under subsection 136.1(2), ongoing services will be treated as a series of separate supplies of services, one for each period (referred to as a "billing period") to which a particular payment is attributable and during which the service is rendered under the agreement. For each billing period, the supplier is deemed to have made, and the recipient is deemed to have received, a separate supply of the service on the earliest of:
• the first day of the billing period;
• the day the payment for that billing period becomes due; and
• the day the payment attributable to the billing period is made.
75. The payment attributable to the billing period is deemed to be consideration payable for the supply of the service for that billing period.
76. For purposes of claiming an ITC, the formula in subsection 169(1) applies separately to each amount of tax that becomes payable or is paid without having become payable with respect to each taxable supply. Therefore, the person may not be entitled to claim an ITC to the same extent for each of these amounts of tax since the use of the service in the course of the person's commercial activities as determined through the application of section 141.01 may change for each billing period.