25 March 2021 CBA Commodity Taxes Roundtable, Q.4

Is the supply of “virtual payment instruments” (“VPI”), such as Bitcoin, to Canadian resident recipients an exempt supply, and does the answer change if the supplier mined such cryptocurrency? CRA responded:

Where a cryptocurrency meets the proposed definition of a “virtual payment instrument” (VPI) it will also be a “financial instrument”. Paragraph (d) of the definition of “financial service” means the issue, granting, allotment, acceptance, endorsement, renewal, processing, variation, transfer of ownership or repayment of a financial instrument. None of the exclusions under paragraphs (n) to (t) of the definition of “financial service” would apply with respect to the supply of a VPI. Accordingly, the supply of a VPI is [an exempt] financial service.

… The supply of a VPI made to a Canadian resident is subject to the same GST/HST tax treatment regardless of whether the person supplying the VPI was the person that acted as a miner with respect to the issuance of the VPI or is another person involved in the making of a supply of a VPI.

Are supplies of VPI by financial institutions to non-resident persons zero-rated? CRA responded:

We note that paragraph 1(e) of Part IX of Schedule VI specifically excludes from zero-rating a supply of a financial service made by a financial institution to a non-resident person, where the service relates to a financial instrument (other than an insurance policy or a precious metal) that was acquired, otherwise than directly from a non-resident issuer, by the financial institution acting in the capacity as a principal. Therefore, in the circumstances where a particular supplier of a VPI acquired the VPI otherwise than directly from a non-resident issuer of the VPI, the supply of the VPI by that supplier would be an exempt financial service, regardless of whether the VPI is supplied to a non-resident person or not.