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The Trade-In Rule: Ownership of the Property Traded In

Where a merchant or dealer registered for the goods and services tax (GST) and the Québec sales tax (QST) is selling or leasing tangible personal or corporeal movable property and accepts pre-owned tangible personal or corporeal movable property as full or partial payment of the transaction, the credit the merchant or dealer grants for the property traded in may, under certain circumstances, reduce the amount on which the GST and QST in respect of the sale or lease of the property are calculated.

Often called the "trade-in rule," this rule applies, for example, where a used road vehicle is given to a car dealer by a person acquiring a new vehicle.

Under the Comprehensive Integrated Tax Coordination Agreement Between the Government of Canada and the Government of Québec, the Québec government generally agreed that, effective January 1, 2013, results under the QST system would be identical to those under the GST/HST system.

Since that date, the trade-in rule has been applicable only where the person acquiring property by way of sale or lease is the owner of the property traded in. That condition must be met in order for the GST and QST in respect of the sale or lease of the property to be calculated on a reduced amount.

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