The contract controls the analysis
Two agreements both called leases can have different purchase options, residuals, terms and economic outcomes. Accountants examine the actual rights and obligations, not simply the heading on the document.
Provide the final agreement—not only a payment quote—when seeking advice.
Expense timing and sales taxes
Lease payments, capital cost allowance, interest and ownership can be treated differently depending on the structure and applicable rules. GST/HST treatment and payment timing can also affect cash flow.
Merrit Capital can describe the commercial payment structure, but cannot determine the borrower’s tax treatment.
Questions for the accountant
Ask how the agreement will appear in the financial statements, which party claims depreciation or capital cost allowance, how payments are treated, what happens at the purchase option and how early termination changes the result.
Tax rules and business circumstances change. Obtain current advice before relying on a perceived tax benefit.
Key points to carry into the transaction
- Review the final contract
- Ask about GST/HST timing
- Understand depreciation and expense treatment
- Consider end-of-term options
- Use current professional advice