Amex Bank – Federal Court of Appeal confirms that costs of rewards under a credit card loyalty program were incurred in promoting the supply of credit: no ITCs

CRA denied the input tax credit (“ITC”) claims of Amex for its 2002 to 2012 taxation years for GST/HST paid on expenses arising in connection with the administration and operation of Amex’s Membership Rewards Program (“MRP”), including expenses incurred for the purpose of providing its cardholders who were members of the MRP (“Members”) with rewards on the redemption of points earned by them mostly through making purchases on their cards.

Woods JA found no reversible errors in the findings of Hogan J, who in dismissing Amex’s appeal, concluded that:

• “[A]ll of the elements and components of the MRP are inherently intertwined and connected with the exempt supply of financial services made by the Appellant to its Members and merchants.” In particular, he found that Amex incurred such expenses “for the purpose of earning greater [GST/HST-exempt] merchant discount revenue in its credit card business.”
• The payments made by Amex for redeeming Members’ travel certificates thus were made in the course of making a single composite supply of exempt financial services, so that no ITCs were available under the notional ITC rule in s. 181(5).
• The free supply rule in s. 141.01(4) did not apply, as the rewards had a purpose of promoting Amex’s supply of credit rather than the activities of the merchants supplying the rewards.

In response to a submission that the $50 enrolment fees to join the MRP were not nominal, so that Amex should be characterized as making separate taxable supplies under the MRP, Woods JA found no error in the finding below that the fee was very low in comparison to the value of the MRP and, thus, insufficient to support a conclusion that Members received anything other than a single composite supply of exempt financial services.

Neal Armstrong. Summaries of Amex Bank of Canada v. Canada, 2026 FCA 31 under ETA s. 169(1), s. 181(5) and s. 141.01(4).