CRA rules that a high deposit rate provided only to those opening up FHSA accounts associated with a Canadian bank does not trigger advantage tax

As a promotional incentive to induce individuals to open FHSAs with a trust company owned by a Canadian Sched. I bank, the bank will offer to pay a high rate of interest on deposits of such FHSAs made with it, i.e., an interest rate in excess of that paid on any other types of accounts associated with the bank.

CRA ruled that the high interest rate paid on such deposits will not constitute an “advantage” as defined in s. 207.01(1), on the basis that the exception in (a)(v) of that definition will be met – which, in approximate terms, refers to an incentive offered in a normal commercial or investment context to “a broad class” of arm’s length persons where it is reasonable to conclude that none of the main reasons for the program is to access the registered plan exemption for “any amount in respect of the plan.”

Neal Armstrong. Summary of 2023 Ruling 2023-0979811R3 under s. 207.01(1) – advantage – (a)(v).