Theory and Practice
Canada’s system mixes VAT‑style taxes (often recoverable) with retail sales taxes (often non‑recoverable). This makes tax classification a frequent operational issue for lease portfolios spanning multiple provinces (CRA, 2023; Province of British Columbia, 2026).
GST/HST (federal and harmonized taxes) — generally recoverable
GST/HST registrants generally recover GST/HST paid or payable on business purchases used in commercial activities via input tax credits (ITCs), subject to eligibility and restrictions for certain entities (CRA, 2023).
Implication: where GST/HST is recoverable, it is typically treated as a tax receivable and excluded from lease measurement, similar to other VAT/GST systems (CRA, 2023; IFRS Interpretations Committee, 2021b).
Québec QST — recoverable via ITRs (Québec‑specific)
In Québec, registrants can generally recover QST through input tax refunds (ITRs) (Revenu Québec, n.d.).
Implication: where QST is recoverable, it is treated as a receivable and excluded from lease measurement; where recovery is restricted, the non‑recoverable portion becomes a cost similar to irrecoverable VAT (Revenu Québec, n.d.; IFRS Interpretations Committee, 2021b).
Separate provincial sales taxes (PST/RST) — generally non‑recoverable
In provinces such as British Columbia, PST is a retail sales tax applied to the purchase or lease price of taxable goods and services, administered separately from GST (Province of British Columbia, 2026).
Lease implication: PST is typically a real cost and is generally treated as an expense as incurred (or part of the underlying cost stream), rather than an input tax receivable (Province of British Columbia, 2026).
Key takeaway
Canadian lease systems need province‑specific tax handling because “sales tax” may be recoverable (GST/HST/QST) or non‑recoverable (PST/RST), depending on the jurisdiction and the entity’s activity (CRA, 2023; Revenu Québec, n.d.; Province of British Columbia, 2026).