The Tax Court of Canada has released a landmark decision on the goods and services tax/harmonised sales tax (GST/HST) status of certain commonplace transaction processing services – namely, Visa's payment platform offered to financial institutions.

In Canadian Imperial Bank of Commerce (CIBC) v Her Majesty the Queen (2018 TCC 109) the Tax Court held that the supply of services made by Visa to CIBC fell outside the definition of a 'financial service' under the Excise Tax Act and therefore did not qualify as an exempt supply. As such, Visa had correctly charged tax on its service fees.


CIBC claimed that the services constituted an exempt financial service and therefore applied to the Canada Revenue Agency (CRA) for a rebate for the tax that it paid to Visa in error. The CRA denied the rebate and CIBC appealed.


The first issue before the Tax Court was how to characterise Visa's services. There was no dispute that, even though Visa's services embodied different service activities and benefits, Visa made a single supply of a service. In other words, there was one transaction for GST/HST purposes, which included the following components:

  • transaction processing;
  • licensing of the Visa brand;
  • payment network management; and
  • brand management and promotion.

Having determined that there was a single supply, the next step was to establish the essential or predominant character of the supply, in order to identify its GST/HST status. After a substantial case law review, the court characterised the supply as the provision "of a payment platform and facilitating payments on that platform".

The remaining question was whether Visa's services constituted a financial service under the Excise Tax Act. Under the act, the definition of a 'financial service' is divided into two parts: the inclusionary paragraphs and the exclusionary paragraphs. To determine whether a service is a financial service, the court first checks whether it is included in paragraphs (a) to (m) of the definition. If it is included, the court then considers whether the service falls into any of the express exclusions listed in paragraphs (n) to (t). If the service falls into one or more of the exclusionary paragraphs, it is not a financial service.

The Tax Court held that Visa's services fell into the inclusionary paragraphs (a), (i) and (l), but that they also fell into exclusionary paragraph (t). Paragraph (t) provides that excluded services may be prescribed by regulation, which in this case was the Financial Services and Financial Institutions (GST/HST) Regulations. Section 4 of the regulations excludes any service that constitutes an administrative service. The court found that Visa's services were "quintessentially administrative in nature" because Visa relieved CIBC of the need to keep track of and individually pay merchants for credit card transactions by allowing it instead to make one lump-sum payment to Visa at the end of each day.

However, Section 4 of the regulations also provides that the exclusion does not apply if the person providing the administrative service is a 'person at risk. This is defined as follows:

...a person who is financially at risk by virtue of the acquisition, ownership or issuance by that person of the instrument or by virtue of a guarantee, an acceptance or an indemnity in respect of the instrument, but does not include a person who becomes so at risk in the course of, and only by virtue of, authorizing a transaction, or supplying a clearing or settlement service, in respect of the instrument.

In other words, if Visa was a person at risk, then its services would constitute a financial service, despite being an administrative service. The court accepted that Visa technically bears some risks, including:

  • merchant risk;
  • foreign exchange risk; and
  • possibly sovereign risk.

However, the court held that these risks were remote, with the probability of risk exposure being extremely low. As part of its analysis, the court considered a 1991 Department of Finance news release explaining the purpose of the 'person at risk' definition. The publication explicitly stated that the intention behind the definition was to ensure that administrative services in credit card transactions would not be financial services merely because of a remote risk of honouring payments borne by the service provider. Therefore, the court ruled that the "purely hypothetical remote risks" borne by Visa were insufficient to qualify it as a 'person at risk'.

As such, Visa's services were not financial services and the company had correctly charged tax. CIBC's rebate claims were therefore dismissed.

For further information please contact Noah Sarna or Zheting Su at Thorsteinssons LLP by telephone (+1 604 689 1261) or email ( or The Thorsteinssons LLP website can be accessed at

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