Lease of a Road Vehicle
The GST and QST apply to leases of road vehicles.
Calculating the GST and QST
The GST and QST are generally calculated on the monthly lease payments, determined on the basis of the residual value of the new vehicle leased, but not on the basis of a loan related to the trade-in vehicle.
Where a dealer accepts a used road vehicle as a trade-in on the lease of a road vehicle, the monthly payments are determined based on the credit given for the trade-in.
The GST and QST must also be calculated on any amount paid by you at the end of the contract.
Collecting the GST and QST
The lessor must collect the GST and QST on the monthly payments for the short-term or long-term lease of a road vehicle. In the case of a long-term lease, the lessor must also collect the GST and QST if you exercise the purchase option provided for in the leasing contract.
A dealer registered for the GST and the QST leases a $20,000 motor vehicle to an individual. The dealer accepts the individual's used vehicle as a trade-in and grants a $5,000 credit for the trade-in. The residual value of the leased vehicle is $8,000 and the lease period is 48 months.
The monthly payments are calculated as shown below:
|Value of the new vehicle||$20,000|
|Credit for the trade-in||-||$5,000|
|Residual value (purchase option)||-||$8,000|
|Cost to lease the vehicle||$7,000|
|Monthly lease payment ($7,000 ÷ 48 months)||$145.83|
|GST ($145.83 × 5%)||+||$7.29|
|QST ($145.83 × 9.975%)||+||$14.55|
|Monthly payments ($145.83 + $7.29 + $14.55)||$167.67|
- Assuming a 0% interest rate.
Road vehicle equipped with new tires
As a rule, the GST and QST apply to the specific duty on new tires.
The GST does not apply if:
- the lessor is a small supplier that is not registered for the GST; or
- the sale of the road vehicle or tires, or the lease of the road vehicle, is zero-rated under the GST system.
The QST does not apply if the sale of the road vehicle or tires, or the lease of the road vehicle, is zero-rated under the QST system.