The battle between Coles and Woolworths has escalated with Coles using an elaborate tax haven structure to conceal its purchase of one of Woolworths' most profitable stores.

Fairfax Media has obtained documents that reveal Woolworths' arch rival Coles is now the landlord of its Neutral Bay supermarket.

Brand new owner: Woolworths in Neutral Bay. Credit:James Brickwood

The move has blindsided Woolworths, which was unaware that one of its most profitable stores was bought by Coles for $40 million.

''This is a surprise, and it's not common practice by any means. I'm not going to commentate on what Coles' motivation is, that's for them to answer,'' a Woolworths spokeswoman said after Fairfax informed the group.