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Top 5 Need-to-Know Canadian GST/HST Cases from 2024

The start of a new year is always a time to reflect on what has happened in the previous year. On the GST/HST front, there were numerous GST/HST decisions that were released by the Federal Court of Appeal and Tax Court of Canada. This post identifies and summarizes the top 5 GST cases for 2024 to assist clients with some of the learnings and issues in 2024 that may impact GST/HST issues for 2025.

1. Notional input tax credits available on loyalty redemption payments

President’s Choice Bank v. Canada, 2024 FCA 135

President’s Choice Bank made payments to Loblaws to reimburse Loblaws for discounts that Loblaws provided customers when they redeemed loyalty points at Loblaws stores. The FCA concluded that the redemption payments were paid in the course of a commercial activity (driving customers to Loblaws) and in the course of an activity that is not commercial (provision of financial services). As the test is not an “exclusively” or “primarily” test, PC Bank was entitled to notional input tax credits in respect of the redemption payments.

2. Absent sham, input tax credit entitlement based on legislative conditions and documentary requirements, not on additional due diligence

Entrepôt Frigorifique International Inc. c. Le Roi, 2024 CCI 78

The taxpayer paid a number of employment staffing agencies for the supply of temporary workers. The agencies issued invoices that contained all of the information prescribed by the Regulations and collected GST on the supply of their services. The taxpayer paid the tax and claimed input tax credits to recover the tax paid. The agencies did not remit the tax collected. The Tax Court concluded that it was impossible to conclude that the taxpayer was a participant in a sham and that the Excise Tax Act does not import a requirement on a registrant to exercise additional due diligence (such as ensuring the supplier has a proper physical establishment) when acquiring a supply from a supplier.

For more details about this case, view this McCarthy Tétrault article.

3. Commercial efficacy determines the key element of a single supply

Aeroplan Miles are not gift certificates

The Toronto-Dominion Bank v. The King, 2024 TCC 50

TD Bank entered into an agreement that allowed it to offer Aeroplan Miles to certain TD Bank Visa cardholders. Aeroplan invoiced TD Bank for the points and charged GST/HST thereon. The Tax Court concluded that the supply under the agreement was for Aeroplan Miles, as there would have been no point in obtaining marketing services or exclusive rights to use the logo and data analytics, without the ability to obtain the Aeroplan Miles. The Tax Court then concluded the Aeroplan Miles were not gift certificates because they had no stated monetary value, were not transferrable without paying a fee, and a significant condition for their use was the need to accumulate more Aeroplan Miles.

This decision is currently under appeal to the Federal Court of Appeal.

For more details about this case, view this McCarthy Tétrault article.

4. Pre-approved method preserved the right to audit the input tax credit characterization

Foreign interchange services to non-residents are zero-rated

Expenses for redemption of loyalty reward points are part of an exempt supply of granting credit

Royal Bank of Canada v. The King, 2024 TCC 125

Based on its pre-approved method, RBC claimed input tax credits on expenses incurred to earn interchange fees from non-residents and to redeem loyalty reward points earned by cardholders who transacted with foreign merchants. The Tax Court concluded that the pre-approved method preserved the right of the Minister to audit the claimed input tax credits to determine whether they related to an exempt or zero-rated supply. The Tax Court then concluded that foreign interchange services to non-residents were zero-rated financial services because they related to the granting of credit, not the lending of money. Finally, the Tax Court concluded that the expenses for the redemption of loyalty reward points earned by cardholders from transactions involved non-resident merchants were part of the exempt supply (granting credit) and not part of the taxable supply (foreign interchange services).

This decision is currently under appeal to the Federal Court of Appeal.

5. To the extent that an insurance policy covers risks that were ordinarily situated outside Canada, the supply is zero-rated

Insufficient evidence on a policy by policy basis could not allow zero-rating status

Northbridge Commercial Insurance Corporation v. The King, 2024 TCC 10

The taxpayer issued fleet insurance policies to trucking companies, who operate vehicles in Canada and the United States. The taxpayer claimed input tax credits on the basis that the supplies of insurance polices were zero-rated. The Federal Court of Appeal concluded that the supply of an insurance policy is zero-rated to the extent that the policy insures against the risk of a claim arising from an accident or other insurable event that is ordinarily situated outside Canada. The Federal Court of Appeal sent the appeal back to the Tax Court judge to determine the extent to which the policies related to risks usually situated outside Canada. The Tax Court dismissed the appeal on the basis that there was insufficient evidence about how each individual policy was priced such that it could not make any determination.

This decision is currently under appeal to the Federal Court of Appeal.

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