25th February 2024

Better business. Better community

Business Industry and Financial

Finances 2023: Proposed GST/HST Amendments Have an affect on the Scope of Economical Providers

Price range 2023: Proposed GST/HST Amendments Have an effect on the Scope of Fiscal Products and services

March 31, 2023
Tax Bulletin

2 minute study

Spending budget 2023 proposes to amend the Excise Tax Act (the “ETA”) to expressly issue supplies of “payment card network” products and services to Goods and Expert services Tax/Harmonized Revenue Tax (“GST/HST”). The proposed modification to the ETA is intended to overrule the judgment of the Federal Courtroom of Attraction in Canadian Imperial Lender of Commerce v. The Queen, (the “CIBC Visa Decision”), which held that “payment card network” services had been exempt economical solutions.

In which a community operator, this kind of as Visa, offers payment clearance products and services for credit (or debit) cards, these products and services will no more time qualify as “financial services” for the needs of the ETA. The proposed exclusion from the definition of “financial service”, when enacted, may have retroactive effect. The retroactive effect could undermine rebate programs previously submitted for GST/HST paid out in respect of exempt payment card clearance expert services based on the CIBC Visa Choice.

Spending budget 2023 usually proposes to lengthen the time during which the Canada Revenue Company may possibly assess a individual as possessing manufactured taxable materials of payment card clearance expert services excluded from the definition of “financial service” outside of the regular statutory evaluation period (up to 1 yr right after the laws is enacted to increase the exclusion).

The proposed exclusion from the definition of “financial service” in the ETA could have broader implications than just excluding “payment card network” companies.  In Zomaron Inc. v. The Queen, the Tax Court of Canada uncovered that an middleman “arranging for” payment card community expert services can make exempt supplies of fiscal products and services in just the indicating of paragraph (l) of the “financial service” definition. If an middleman is now taken to do arranging for taxable (non-economical) services, the intermediary’s providers will no extended qualify as a “financial service” under paragraph (l).  It is doable that the intermediary could recoup the relevant GST/HST from a registrant network operator with no raising the operator’s prices, since the operator would obtain the intermediary’s products and services to make its taxable provides, and ought to for that reason be entitled to recover the taxes by way of enter tax credit history promises.

Supplies of the two “payment card network” providers, as properly as intermediaries that organize for such providers, must carefully take into consideration the implications of the amendment to the ETA proposed in Spending plan 2023.

by Jamie M. Wilks

A Cautionary Notice

The foregoing offers only an overview and does not constitute lawful tips. Audience are cautioned towards generating any choices primarily based on this content by itself. Fairly, precise authorized assistance should really be attained.

© McMillan LLP 2023

link