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An overview by Borden Ladner Gervais, Taxand Canada
The Canadian Federal Court of Appeal has recently overturned the Tax Court’s denial of President’s Choice (PC) Bank’s notional input tax credits (NITCs) on reimbursement payments made to Loblaw for customer loyalty point redemptions. The Court held that such payments were made both in the course of PC Bank’s exempt financial services and its commercial activity of driving customers to Loblaws, rejecting the Tax Court’s binary approach.
By interpreting “in the course of” broadly to mean “incidental” or “connected to,” the FCA confirmed that a payment may relate simultaneously to commercial and exempt activities unless the Excise Tax Act specifies otherwise through restrictive language (e.g. “exclusively” or “primarily”). This broader reading may affect GST/HST compliance more widely, underscoring that commercial purposes must be grounded in actual business activity, as was the case with PC Bank’s role in the loyalty programme.
Tanner Shapka and Owen Clarke from our Canadian member firm Borden Ladner Gervais have published a more detailed examination of the case and its implications here.
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