A corporation, which is not engaged exclusively in commercial activities, issues shares and pays dividends to its shareholders, who are both resident and non-resident. Before finding that the dividends were a financial service under para. (f) which was supplied to the shareholders, CRA stated:
Paragraph (d) of the definition of “financial service” in subsection 123(1) includes the issue, granting, allotment, acceptance, endorsement, renewal, processing, variation, transfer of ownership or repayment of a “financial instrument”. Under their respective definitions in this same subsection, a "financial instrument" includes an "equity security", meaning a share of the capital stock of a corporation or any interest in or right to such a share. Therefore, by definition, shares are financial instruments for GST/HST purposes and the issuance of the shares by the Corporation is a financial service under paragraph (d) of the definition of “financial service”. Also, this financial service is “supplied” to shareholders, as this term is defined in the ETA, as the shares are provided to shareholders.