Trade-In Between an Individual Who Is a GST and QST Non-Registrant and a Dealer

When a dealer that is registered for the GST and QST accepts a road vehicle as a trade-in for a used vehicle sold to an individual, the credit given for the vehicle traded in reduces the net cost (on which the GST and QST are calculated) of the vehicle acquired by the individual.

Thus:

• GST must be calculated on the difference between the selling price of the vehicle and the credit given for the vehicle accepted as a trade-in
• QST must be calculated on the aggregate of the following amounts:
  • the difference between the credit given for the vehicle accepted as a trade-in and the higher of the following amounts:
    • the estimated value (This link will open a new window) of the vehicle acquired
    • the selling price of the vehicle acquired and the GST charged
• the total GST payable

However, the following conditions must be met:

• the vehicle traded in is intended for use or supply in the dealer's commercial activities 
• the individual who trades in the used vehicle is not required to collect GST or to collect or calculate QST on the vehicle

If these conditions are met, a registered dealer who accepts a used road vehicle as full or partial consideration for another road vehicle must:

• collect the GST payable
• collect or indicate, as applicable, the QST payable

Example

An individual who is not required to collect the GST or to calculate or collect the QST purchases a used motor vehicle for $20,000 from a used-vehicle dealer. The estimated value of the vehicle is $23,500, that is, the average wholesale price minus $500. The vendor accepts the individual's old vehicle as a trade-in, crediting the individual $5,000.

Note

In the case of motor vehicles (This link will open a new window), the QST is calculated by the dealer but paid by the purchaser to the Société de l'assurance automobile du Québec (SAAQ) when the vehicle is registered. In all other cases, the QST must be collected by the dealer.