Quick answer: Yes. In Canada, renting or leasing equipment to a business is usually a taxable supply, so GST or HST is charged on each rental or lease payment and on most lease fees. The lessee pays the tax, and the lessor collects it and sends it to the Canada Revenue Agency (CRA). Which rate applies depends on where the equipment is delivered (rentals of three months or less) or where it is ordinarily located (longer leases), so where the lessor is based doesn't decide it. If your business is registered for GST/HST and uses the equipment in its commercial activities, you can usually get the tax back as input tax credits (ITCs). Provincial sales tax in BC, Saskatchewan and Manitoba can't be recovered that way.
Disclaimer: This article is general information only and is not tax, legal or accounting advice. Tax rules change and depend on your situation. Speak with a qualified accountant or tax advisor before making any purchase or filing decision. Mehmi Financial Group does not provide tax advice.
Last updated: November 10, 2026. All rates and rules below are current law unless marked otherwise.
Key takeaways
- GST/HST applies to each lease payment on a commercial equipment lease. The rate runs from 5% GST to 15% HST depending on the province (CRA, page updated July 15, 2026).
- Nova Scotia's HST dropped to 14% on April 1, 2025. Ontario is 13%, and New Brunswick, Newfoundland and Labrador and Prince Edward Island are 15%.
- Rentals of three months or less are taxed where the equipment is delivered. On longer leases, each payment period is a separate supply, taxed where the equipment is ordinarily located for that period.
- Registered businesses can generally claim the GST/HST back as ITCs. Most have four years to claim.
- BC PST (7%), Saskatchewan PST (6%) and Manitoba RST (7%) can apply to leases too, and they are a real cost because no credit is available.
Is rental or leased equipment taxable in Canada?
For almost every business asset, yes. The Excise Tax Act treats a lease or rental of goods as a supply, and if the goods are taxable when sold, they are generally taxable when leased. That covers excavators, trucks, forklifts, medical devices and most other business equipment. You can read more about how a lease works in our glossary entry on the equipment lease.
There are a few exceptions. Some property is zero-rated, which means it is taxable at 0%. Certain farm equipment falls in this group when sold. CRA Info Sheet GI-051 says a lease of farm equipment is generally taxable even so. Where the lease includes a purchase option, though, CRA notes the buy-out portion may be zero-rated if it counts as a sale under the agreement. Leases to First Nations individuals and bands, where possession is first given on reserve, can also be relieved of tax under CRA's rules in that area.
Who pays, who collects
| Party | What they do with GST/HST | Can they recover it? |
|---|---|---|
| Lessor (finance company or rental firm) | Charges tax on rent, fees and buyouts, then remits it to CRA | Claims ITCs on the tax it paid to buy the equipment |
| Registered lessee | Pays tax with each invoice | Usually yes, through ITCs, in proportion to commercial use |
| Unregistered lessee (small supplier) | Pays tax with each invoice | No, so the tax becomes part of the cost |
| Business renting equipment out to customers | Charges and remits tax on rental income if registered | Claims ITCs on its own fleet costs |
Current GST/HST rates by province
The CRA rate table, last updated July 15, 2026, lists four main rates. These are law, not proposals.
| Province or territory | Sales tax on equipment leases | Recoverable as ITC? |
|---|---|---|
| Ontario | 13% HST | Yes, for registrants |
| Nova Scotia | 14% HST (since April 1, 2025) | Yes, for registrants |
| New Brunswick, Newfoundland and Labrador, Prince Edward Island | 15% HST | Yes, for registrants |
| Alberta, Yukon, Northwest Territories, Nunavut | 5% GST | Yes, for registrants |
| British Columbia | 5% GST plus 7% PST on the lease price | GST yes, PST no |
| Saskatchewan | 5% GST plus 6% PST | GST yes, PST no |
| Manitoba | 5% GST plus 7% RST | GST yes, RST no |
| Quebec | 5% GST plus QST, administered by Revenu Québec | GST yes; QST rules set by Revenu Québec |
For a province-by-province walk-through with worked examples, see our guide to GST/HST on equipment leases by province, and for the western provinces, PST on equipment leases in BC, Saskatchewan and Manitoba.
How the place-of-supply rules decide your rate
CRA splits leases into two groups based on how long each lease interval runs.
Short rentals: three months or less
When the lease runs three months or less, CRA applies the same rules it uses for sales. The supply is made in the province where the goods are delivered. CRA's own example is a six-week camera rental in Truro, which carries Nova Scotia HST. A two-month excavator rental delivered in Moncton carries New Brunswick HST.
Longer leases: more than three months
On a longer lease, CRA treats each lease interval, usually each month, as a separate supply. Each one is made on the earliest of three dates: the start of the interval, the day payment is due, or the day it's paid. The rate for that interval follows where the equipment is ordinarily located during it.
So the rate can change partway through a lease. CRA gives the example of a photocopier that sits in New Brunswick for three intervals, then moves to Manitoba. The first three payments carry 15% HST. The fourth carries 5% GST. Revenu Québec applies the same three-month split for QST, with lessor and lessee agreeing on the usual location at the start of each period.
If you run trucks or mobile equipment across provinces, tell your lessor where the units are based. A wrong location on the lease means the wrong rate on every invoice. This comes up often with truck and trailer financing for regional fleets.
Moving equipment into a higher-tax province
Buy equipment in a lower-tax province and bring it into a participating province with a higher HST rate and you may need to self-assess the provincial part of the HST. CRA says this generally isn't required if you are a registrant using the goods at least 90% in your commercial activities. Registrants report any self-assessed amount on line 405 of their return. Motor vehicles have their own rules, so check with your accountant before relocating a fleet.
What gets taxed over the life of a lease
Most charges under a lease agreement are part of what you pay to use the equipment, so they carry the same rate as the rent.
Documentation and setup fees are usually taxed on the first invoice or at signing. Regular payments are taxed each interval: on a $2,000 monthly payment in Ontario, the HST is $260, for an invoice of $2,260. Extra hours, extra kilometres and return-condition fees are generally taxable at the same rate.
A refundable security deposit isn't taxed when paid. If it is later applied to rent or a buyout, tax applies at that point (see our post on dealer deposits on leased equipment). Exercising a purchase option is a sale, so GST/HST applies to the buyout price at the rate in force then. Our glossary explains the buyout and residual value.
Insurance charged through the lessor can be tricky. Some insurance is an exempt supply, so ask for it to be shown on its own line. Our guide to insurance for leased equipment in Canada covers the options.
Getting the tax back: input tax credits
If your business is registered and leases equipment for its commercial activities, you can generally claim the GST/HST on each payment as an ITC on your return. A few rules matter.
Registration and the $30,000 threshold
CRA's registration page, updated June 16, 2026, says you stay a small supplier as long as you don't exceed $30,000 in taxable sales over four consecutive calendar quarters. Go over $30,000 in a single quarter and you must register sooner. Small suppliers don't have to register, but they can't claim ITCs either. A small operator leasing a $150,000 machine in Ontario pays 13% HST on every payment with no way to recover it. Voluntary registration is worth a conversation with your accountant before you sign.
Time limits and paperwork
CRA says most registrants must claim an ITC by the due date of the return for the last reporting period ending within four years of when the credit could first be claimed. Some businesses, such as listed financial institutions, get only two years. Your supporting documents need more detail as the purchase amount rises, with CRA setting tiers under $100, $100 to $499.99 and $500 or more. Invoices showing the lessor's GST/HST number usually cover it.
Mixed use
If a leased asset is used partly for personal purposes, the claim is generally limited to the business share. Passenger vehicles have extra limits. Our post on GST/HST input tax credits on financed equipment goes deeper.
Leasing versus buying: how the sales tax timing differs
For a registered business, the total GST/HST is close to neutral over time, because it comes back as ITCs either way. What changes is when the cash goes out.
| Structure | When GST/HST is paid | Cash flow effect | Who claims CCA |
|---|---|---|---|
| Cash purchase | On the full price at purchase | Large outlay until the ITC comes back | Your business |
| Equipment loan or conditional sale | Usually on the full price at purchase | Tax may need to be funded up front or financed | Your business |
| True lease | On each payment over the term | Tax is spread out and recovered as you go | The lessor; you deduct the lease payments |
| Short-term rental | On each rental invoice | Smallest commitment, highest cost per month | The rental company |
On a $300,000 purchase in Nova Scotia, the HST is $42,000. A registered buyer gets it back, but has to float it until the return is processed. Under a lease, that tax arrives a payment at a time. Compare both paths with our loan vs lease comparison calculator, or read about conditional sales contracts and equipment leases.
Income tax works differently. With a loan or conditional sale your business claims capital cost allowance; with a true lease you deduct lease payments. Federal expensing rules (the Bill C-15 Productivity Super-Deduction is law; the Productivity Mega Deduction announced September 15, 2026 is proposed) are covered in claiming CCA on leased equipment.
Special situations
Intercompany leases
Many trucking and construction groups hold equipment in one company and lease it to an operating company. Tax on those leases is easy to overlook. A 2024 Truck News article notes GST/HST generally applies to intercompany lease payments, though closely related corporations may be able to file a joint election with CRA so that no tax is charged. The same article flags that BC, Saskatchewan and Manitoba sales taxes can still apply and can't be recovered. Put the election and a written lease in place before the first invoice.
Sale-leaseback and refinancing
In a sale-leaseback, selling the equipment to a lessor is usually a taxable sale if you are registered, and the new lease then carries tax on each payment. See refinancing and sale-leaseback and our guide to refinancing a leased asset without cash strain.
What we see on real files
The most common issue is a lease written to the wrong province, usually because the equipment was delivered to head office and then moved to a job site. The second is a newer business that hasn't registered for GST/HST and only realizes after a few payments that the tax can't be recovered. We also see buyout invoices where nobody planned for the tax on the residual. Each is easy to fix early and costly after a year of wrong invoices.
Checklist before you sign
- Confirm the province where the equipment will be delivered and ordinarily located.
- Check the rate on the quote matches that province.
- Confirm your GST/HST registration status and number.
- Ask how tax will be charged on the buyout.
- For related-company leases, ask your accountant about the joint election.
Frequently asked questions
Do I pay GST/HST on every equipment lease payment?
Generally yes. On leases longer than three months, each interval is a separate supply taxed at the rate for where the equipment is ordinarily located.
Can I recover PST on a lease in BC?
No. BC PST of 7% applies to the lease price and there is no credit system for it, so it is a direct cost.
What if my lessor is in a different province?
It doesn't matter. The rate follows delivery for short rentals and ordinary location for longer leases.
Do I pay tax on the buyout at the end of the lease?
Yes, a purchase option is a sale, so GST/HST applies to the buyout price. Registrants can usually claim it back as an ITC.
Can a startup lease equipment?
Yes. Most lenders want to see at least six months of revenue in business bank statements. Registering for GST/HST early helps you recover tax from the first payment.
Tools and next steps
- Run the numbers with the equipment financing calculator.
- Look up terms in the GST/HST glossary entry and the sale-leaseback definition.
- See what qualifies on our eligible equipment page.
- Read industry pages for transportation and trucking and construction contractors.
- If a lease is coming to an end, read upgrading leased equipment before the term ends.
Talk to us about your next lease
Mehmi Financial Group works with over 50 lenders across Canada and the USA on equipment financing, leases and loans. We can lay out lease and loan options side by side for you and your accountant. Approval, rates and terms depend on lender review. Call 1-833-863-4644 or contact us.
Disclaimer: This article is general information only and is not tax, legal or accounting advice. Tax rules change and depend on your situation. Speak with a qualified accountant or tax advisor before making any purchase or filing decision. Mehmi Financial Group does not provide tax advice.
Sources
- Canada Revenue Agency, GST/HST rates and place-of-supply rules, modified July 15, 2026.
- Canada Revenue Agency, Charge and collect the tax: which rate to charge, modified April 8, 2026.
- Canada Revenue Agency, When to register for and start charging the GST/HST, modified June 16, 2026.
- Canada Revenue Agency, Input tax credits, modified October 14, 2026.
- Canada Revenue Agency, GI-051 Zero-Rated Farm Equipment, February 2009.
- Canada Revenue Agency, GST/HST Policy P-230 on leases to Indians, Indian bands and band-empowered entities.
- Government of British Columbia, Bulletin PST 315, Rentals and Leases of Goods, revised April 2025.
- Revenu Québec, Leases of corporeal movable property, accessed November 2026.
- Truck News, Canadian sales tax on intercompany truck and equipment leases, October 9, 2024.
Written by Jodhbir Mehmi. Reviewed under our editorial standards. Updated November 2026.