Section 188.2

Denial of ITCs by virtue of ss. 188.2(2) and (3) (under “Eligibility for ITCs”)

Subject to the exclusion in subsection 188.2(5), to the extent that a person acquires, imports or brings into a participating province property or a service for consumption, use, or supply in the course of, or in connection with, mining activities of the person, the person is deemed to have acquired, imported or brought into the participating province, as the case may be, the property or service for consumption, use, or supply otherwise than in the course of commercial activities of the person. This is set out in subsection 188.2(2). Accordingly, the person is not eligible to claim input tax credits (ITCs) with respect to such property or services acquired, imported or brought into a participating province after February 4, 2022. This treatment applies even if the person does not receive any remuneration as a consequence of performing a mining activity, for example, in circumstances where acquisitions are used in a mining activity however the person is not successful in earning any remuneration.

In addition, if a person at any time consumes, uses, or supplies property or a service in the course of, or in connection with, mining activities of the person, that consumption, use, or supply is deemed to be otherwise than in the course of commercial activities of the person in accordance with subsection 188.2(3). This applies if the consumption, use, or supply of the property or a service occurs after February 4, 2022.

Imported taxable supply by virtue of ss. 188.2(2) and (3) (under “Self-assessments”)

The person must also consider the requirement to self-assess tax under Division IV with regard to imported taxable supplies as the exclusion from the definition of imported taxable supply for property or services acquired for consumption, use or supply exclusively in the course of commercial activities does not generally apply for property or services acquired for consumption, use or supply in whole or in part in mining activities. In addition, the person must also consider the requirement to self-assess tax under Division IV.1 with respect to any property or services that are brought into a participating province.

No GST collectible re mining activity including generating network block subsidies (under “Collection of tax”)

Subject to the exclusion in subsection 188.2(5), where a person receives a mining payment in respect of a mining activity, the provision of the mining activity is deemed not to be a supply for GST/HST purposes under subsection 188.2(4). ...

A mining payment in respect of a mining activity is defined in subsection 188.2(1) as money, property, or a service that is a fee, reward, or other form of payment that is received or generated as a consequence of the mining activity being performed. A mining payment would include the block subsidies and transaction fees from the network received by the person that performs the mining activity. A mining payment would also include other types of remuneration received from other persons for the performance of a mining activity.

Under “Mining groups and mining group operators”

Example 1

Corporation A owns computing equipment for use in mining activities. Corporation B wishes to conduct mining activities and requires equipment which will allow Corporation B to validate cryptoasset transactions and add them to a publicly distributed ledger. Corporation B engages Corporation A for the supply of the use of Corporation A's mining equipment. Corporation B is not a mining group operator for a group that includes Corporation A. Corporation A and Corporation B deal with each other at arm's length. Subsection 188.2(5) applies to Corporation A's supply to Corporation B given that Corporation B's identity is known to Corporation A. Therefore, subsections 188.2(2) to (4) do not apply and the supply is subject to the general GST/HST rules.

Single or multiple groups formed with group operator (under “Mining groups and mining group operators”)

A mining group may have as few as two members, for example, the mining group operator and another person. A mining group may also be formed as a result of several agreements. For example, a mining group composed of a mining group operator and five other persons may be under five different agreements, each made between the mining group operator and one of the five other persons.

A mining group operator may coordinate several separate groups of persons performing mining activities. In these circumstances, each group of persons that under a common agreement agree to pool property or services and share with all or part of the group all or part of any fee, reward or any other form of payment, received or generated as a consequence of performing the mining activities, would constitute a separate mining group.

Requirement for sharing of risk

A mining group is a group of persons that agree to contribute property or services to perform mining activities together. In addition, the group of persons share mining payments in respect of the mining activities. …

A person shares mining payments when the person shares in the risk of success in the mining activities of the group. … Where a person receives a direct share of the actual mining payment, or a payment or adjustment that is determined based on the actual mining payment earned by the pool or the operator, the person is generally considered to share in the mining payments. However, where a person earns compensation that is determined based on an estimate of potential mining payments and the amounts are not adjusted to the actual mining payments, the person may not be considered to share in the mining payments. Another factor to consider in determining whether persons share mining payments within a mining group is whether the operator charges fees to persons with respect to the management or administration of the mining endeavours.

… [T]he following types of arrangements for mining would be indicative of a person and a mining pool operator not being members of the same mining group for the purposes of section 188.2:

• The person is paid by the mining pool operator for the contribution of computing resources by the person and the payment is based on the expected value of the number of blocks validated calculated based on the expected block subsidy regardless of whether the activity gives rise to an actual block subsidy or transaction fee [and similarly where such expected value also includes expected transaction fees].

… Such [person’s] supply is subject to the general GST/HST rules … .. Furthermore, in these circumstances, where any amounts are deducted by the pool operator from the payment made to the person, the consideration for the person's supply to the pool operator would be the payment less the deducted amount unless there is clear indication under the arrangements between the parties that the reduction is in respect of a supply made by the pool operator to the person.