Conditional sales contracts and sale-leaseback arrangements

Normally, GST/HST would apply to the sale of goods by a registrant to an unregistered non-resident where the registrant subsequently leases them back and the goods remain in Canada.

However, under the drop-shipment rules, no GST/HST is charged. These rules also apply if the unregistered non-resident is purchasing the goods for the purpose of leasing them to another registrant in Canada.

In this situation, the second registrant must issue a drop-shipment certificate to the first registrant and will only be required to self-assess tax if the second registrant is acquiring the goods for use in non-commercial activities.

Forms and publications

• Guide RC4027, Doing Business in Canada - GST/HST Information for Non-Residents
• GST/HST Memoranda Series Chapter 3-3-1, Drop-shipments