9 April 2025 GST/HST Interpretation 247209 - Mining activities in respect of cryptoassets after February 4, 2022 via mining pools

Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.

GST/HST Rulings Directorate
5th floor, Tower A, Place de Ville
320 Queen Street
Ottawa ON K1A 0L5

[Client Address]

Case Number: 247209

Dear [Client]:

Subject: GST/HST interpretation - Mining activities in respect of cryptoassets after February 4, 2022 via mining pools

Thank you for your correspondence of February 8, 2024, concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to mining activities in respect of cryptoassets concerning mining pools.

The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island. The Government of Nova Scotia has proposed to decrease the rate of the HST from 15% to 14% effective April 1, 2025. The GST applies in the rest of Canada at the rate of 5%.

All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.

We understand you would like to clarify whether certain computer service providers (CSPs) in Canada operating in the cryptoasset industry are permitted to claim input tax credits (ITCs) on GST/HST paid on expenses in the course of their commercial activities after February 4, 2022.

We understand the arrangements concerning mining activities in respect of cryptoassets that involve mining pools to generally operate as follows:

1.The key participants involved in […][cryptoasset] mining are a CSP who own or lease and maintain the mining rig, highly specialized computers, and contribute their computing resources to a mining pool and a Mining Pool Operator (the Operator) that coordinates, oversees or manages the computing resources contributed by many CSPs from around the world in order for the mining pool to secure, also known as “mine”, the [cryptoasset] blockchain by validating transactions.

2. When a mining pool successfully adds a block to the [cryptoasset] blockchain, the mining pool receives a “block reward”. The “block reward” totals two amounts: the total of all transaction fees pledged by the transferors whose transaction are included in the particular block that the mining pool has added to the blockchain, plus a “block subsidy” -- a subsidy awarded of newly minted [cryptoasset] by the [cryptoasset] protocol.

3. The block reward - the aggregate transaction fees and block subsidy - is deposited into the wallet designated by the person who computed the correct hash to add the next block to the blockchain. If a person is self-mining with their own computer, the block reward is deposited into their wallet. In the case of a mining pool, if one of the computers of a CSP processes the correct hash, the block reward is deposited into the wallet owned and designated by the Operator.

4. The four most common forms of payment by which a CSP receives for their computing contributions to a mining pool are:

a. Pay-Per-Share (“PPS”) where the Operator pays each CSP for the computing contributions by the CSP during a specific period of time based on the total block subsidy that the mining pool expects to earn over a period of time. In other words, the Operator is paying the CSP based on an estimate of the block subsidies that the mining pool expects to receive, not on the basis of the actual blocks mined and block rewards earned by the mining pool. The CSP bears no risk associated with mining a block and the mining pool receives all actual block rewards (the actual block subsidy + actual transaction fees).

b. Full-Pay-Per-Share (“FPPS”) where the Operator pays each CSP for the computing contributions by the CSP during a specific period of time based on the expected block subsidy and the estimated transactions fees. The estimated transaction fees are generally the average transaction fees earned on the last 144 blocks added to the [cryptoasset] blockchain. Similar to PPS, the Operator is paying the CSP based on an estimate of the expected block rewards, rather than the actual block rewards received by the mining pool. In FPPS, the CSP bears no risk associated with mining a block and the mining pool receives the actual block rewards.

c. Pay-Per-Last-N-Share (“PPLNS”) where the Operator pays the CSP for the computing contributions by the CSP during a specific period of time based on the actual block reward earned and received by the mining pool during that time. With PPLNS, the amount that the Operator pays a particular CSP is contingent on the number of blocks successfully mined by the mining pool and block subsidies earned by the mining pool.

d. Pay-Per-Share-Plus (“PPS+”) where the Operator pays the CSP for the computing contributions by the CSP during a specific period of time based on the expected block subsidy the mining pool expects to earn, and on the actual transaction fees earned by the pool during that time. Similar to PPLNS, with PPS+ the amount that the CSP receives is partially contingent - in that it is based on the actual transaction fees earned by the mining pool from the transferors but is partially fixed as being based on the expected block subsidy the mining pool expects to receive during the particular period.

5. A mining pool will utilize computing resources from multiple CSPs. The terms and conditions governing the operations of a particular mining pool are usually stipulated on the pool’s website. However, CSPs may have their own specific separate agreement with the Operator in respect of a mining pool and each may elect how they wish to be paid for their computing contributions.

6. With each payment method - PPS, FPPS, PPLNS, PPS+ - the amount payable to a particular CSP is not based on the entire estimated or actual block rewards anticipated or actually earned by the mining pool. Each formula typically starts with a percentage reduction that is payable to the Operator. For example, a particular Operator may retain two per cent (2%) and pay a particular CSP an amount for its computing resources contributed calculated as 98% of the estimated or actual block rewards of the mining pool and the percentage share of the particular CSP’s computing resources that was contributed to the mining pool. This initial percentage reduction retained by the Operator may be negotiated between a particular Operator on behalf of the mining pool and CSPs that make significant contributions to the mining pool with the percentage generally being lower the greater the hash rate the CSP contributes to the mining pool.

7. A CSP is generally not required to contribute any particular amount of computing resources to a mining pool and may start and stop contributing computing services to a particular mining pool at any time without restriction or penalties.

8. CSPs may have agreements for the contribution of their computing resources with multiple mining pools at any given time and may unilaterally determine the amount of computing resources that they contribute to each mining pool at any given point in time. The CSPs may elect to switch which mining pool they contribute their computing resources to at any time without restriction or penalties.

INTERPRETATION REQUESTED

You would like to know whether CSPs in Canada operating in the cryptoasset sector are eligible to claim ITCs on GST/HST paid on expenses in the course of their commercial activities after February 4, 2022.

Based on the information provided, you would like to know whether CSPs in Canada are making a supply of computing services to an identifiable recipient, the Operator, and whether subsection 188.2(5) of the ETA applies to exclude these activities from the GST/HST treatments under subsections 188.2(2) to (4) of the ETA. These considerations affect whether CSPs in Canada are entitled to claim ITCs on GST/HST paid on expenses in the course of their commercial activities after February 4, 2022.

Specifically you are looking for an interpretation from CRA to confirm whether under the following scenarios a supply to an identified recipient is being made and ITCs on GST/HST paid on expenses in the course of commercial activities made after February 4, 2022 may be claimed:

1. A CSP contributing computing resources to a mining pool operated by Company A in exchange for payments in the form of FPPS.

2. A CSP contributing computing resources to a mining pool operated by Company B in exchange for payments in the form of FPPS.

3. A CSP contributing computing resources to a mining pool operated by Company C in exchange for payments in the form of FPPS.

4. (a) A CSP contributing computing resources to a mining pool operated by Company D in exchange for payments in the form of FPPS.

(b) A CSP contributing computing resources to a mining pool operated by Company D in exchange for payments in the form of PPLNS.

5. A CSP contributing computing resources to a mining pool operated by Company E in exchange for payments in the form of PPLNS.

6. A CSP contributing computing resources to a mining pool operated by Company F in exchange for payments in the form of PPS+.

[…].

INTERPRETATION GIVEN

We provide the below information concerning our position with regard to mining activities with respect of cryptoassets. This information can also be found in GST/HST Notice 324 Mining Activities in respect of Cryptoassets.

GST/HST Notice 324

In the cryptoasset industry, most cryptoasset networks that operate through the use of a publicly distributed ledger will utilize the services of persons for validating transactions and adding those transactions to the ledger. Such persons may be awarded remuneration for their activities when they are the person that validates the transactions and adds them to the ledger. The remuneration awarded usually includes a block subsidy from the network and a transaction fee(s), both in the form of cryptoassets. In these circumstances, there is generally no owner of the software or of the cryptoasset network, and no particular person that is responsible for its operation.

GST/HST Notice 324 Mining Activities in respect of Cryptoassets addresses section 188.2 of the ETA which contains rules respecting the application of the consequence of performing a mining activity.

A “mining activity” is defined in subsection 188.2(1) of the ETA to mean an activity of

(a) validating transactions in respect of a cryptoasset and adding them to a publicly distributed ledger on which the cryptoasset exists at a digital address;

(b) maintaining and permitting access to a publicly distributed ledger on which a cryptoasset exists at a digital address; or

(c) allowing computing resources to be used for the purpose of, or in connection with, performing activities described in paragraph (a) or (b) in respect of a cryptoasset.

Subject to the exclusion in subsection 188.2(5) of the ETA, 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) of the ETA. Accordingly, the person is not required to charge the GST/HST in respect of the provision of the mining activity. This applies in respect of the receipt of any remuneration as a consequence of performing a mining activity that is received after February 4, 2022.

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 the other persons for the performance of a mining activity.

Any person making taxable supplies in Canada may be eligible to claim ITCs on their inputs if they meet certain conditions. For example, in order for a person to be eligible to claim an ITC, a person must generally be making taxable supplies for consideration in the course of the endeavour of the person.

Subject to the exclusion in subsection 188.2(5) of the ETA, to the extent that a person acquired, 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. Accordingly, the person is not eligible to claim ITCs with respect to such property or services acquired, imported or brought into a participating province after February 4, 2022. This applies even if the person does not receive any remuneration as a consequence of performing a mining activity.

Further, 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) if this occurs after February 4, 2022.

The rules set out in subsection 188.2(2) to (4) do not apply when subsection 188.2(5) applies. Subsection 188.2(5) applies where the mining activity is performed by a supplier for another person if:

• The identity of the other person is known to the supplier;
• Where the mining activity is in respect of a mining group that includes the supplier; the other person is not a mining group operator in respect of the mining group operator in respect of the mining group: and
• Where the other person is a non-resident and is not dealing at arm’s length with the supplier, each property or service received by the other person from the supplier as a consequence of the performance of the mining activity, is supplied, or is used or consumed in the course of making a supply by the other person to one or more persons each of which
  • Is a person whose identity is known to the other person;
  • Deals at arm’s length with the other person; and
  • Is not a mining group operator in respect of a mining group that includes the other person if the mining activity is in respect of that mining group.

If subsection 188.2(5) applies, the provision of the mining activity is subject to the general GST/HST rules.

A “mining group” is defined in subsection 188.2(1) of the ETA to mean

a group of persons that, under an agreement,

(a) pool property or services for the performance of mining activities; and

(b) share mining payments in respect of the mining activities among members of the group.

A “mining group operator” is defined in subsection 188.2(1) in respect of a mining group to mean a person that coordinates, oversees or manages the mining activities of the mining group.

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.

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 mining group may be commonly referred to as a mining pool however a mining pool may not necessarily meet the definition of a mining group for the purposes of section 188.2. Although a particular person may be a member of a mining pool, that same person would not be a member of the mining group for the purposes of section 188.2 if that person does not share in the mining payments of the group. Accordingly, there may be some persons in a mining pool that are members of the mining group for purposes of section 188.2 while other persons in the mining pool are not members of the mining group.

A person shares mining payments when the person shares in the risk of success in the mining activities of the group. This is a question of fact and must be determined on a case-by-case basis. 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.

In making such determinations, the 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 regardless of whether the activity gives rise to an actual block subsidy or transaction fee. The mining pool operator accepts all of the risk with respect to the person's contribution to the pool as well as benefitting from the actual number of blocks successfully validated and the transaction fees earned. There is no adjustment of the payment received by the person based on the actual block subsidy received by the mining pool operator. The person bears no risk with regards to the mining endeavour itself aside from the ordinary risks that a supplier would encounter in their business such as market risks, equipment risks or foreign exchange risks.
• 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 regardless of whether the activity gives rise to an actual block subsidy or transaction fee. The mining pool operator accepts all of the risk with respect to the person's contribution to the pool as well as benefitting from the actual number of blocks successfully validated and the transaction fees earned. There is no adjustment of the payment received by the person based on the actual block subsidy or actual transaction fees received by the mining pool operator. The person bears no risk with regards to the mining endeavour itself aside from the ordinary risks that a supplier would encounter in their business such as market risks, equipment risks or foreign exchange risks.

In these above arrangements, the person bears no risk in the success of earning the block subsidy and transaction fees. In these cases, where the agreements between the person and the pool operator and any accompanying terms and conditions relevant to the arrangements between the parties support that the arrangements are as set out in the preceding paragraph, this is a supply made by the person providing its computing resources to the pool operator and the person does not share in the mining payments for the purposes of the mining group definition in subsection 188.2(1). Such a supply is subject to the general GST/HST rules under the ETA. 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.

Your Scenarios

You have requested our guidance as it pertains to numerous scenarios that you have posed. In each of the scenarios, CSPs contribute computing resources to a mining pool operated by either Company A, B, C, D, E or F. A CSP performs a mining activity in respect of its computing resources. A CSP either:

• validates transactions in respect of a cryptoasset and adds them to a publicly distributed ledger on which the cryptoasset exists at a digital address; or
• allows its computing resources to be used for the purpose of, or in connection with, validating transactions in respect of a cryptoasset and adding them to a publicly distributed ledger on which the cryptoasset exists at a digital address.

If a CSP performs a mining activity for a mining pool operator, the mining activity is subject to the deeming provisions in subsections 188.2(2) to (4) unless subsection 188.2(5) applies. Where both

• the identity of the mining pool operator is known to the CSP; and
• the mining pool operator and the CSP deal with each other at arm’s length,

subsection 188.2(5) will apply if the CSP is not included in a mining group that uses the CSP’s mining activity contributions.

Whether a CSP is included as a member in a mining group or not is a question of fact. For a CSP to be considered to be included in a mining group, the CSP must both:

• pool its property or services for the performance of mining activities with other members of the mining group; and
• share mining payments in respect of the mining activities among members of the group.

Where a CSP contributes computing resources to a mining pool operated by an Operator, a CSP is considered to pool its property or services for the performance of mining activities with other members of the mining group. Therefore, where a CSP “shares mining payments” in respect of the mining activities among other members of the group, the CSP is included in the mining group and its mining activities with respect to that particular mining group are not excluded by subsection 188.2(5).

Sharing Mining Payments

The explanatory notes to the legislative amendment to the ETA that added section 188.2 states that a “mining group” is meant to generally apply to “ …a group of persons that agree both to each contribute property or services in order to perform mining activities together and to each share in the risk of the success of the mining activities of the group”.

With regards to the payment terms between the parties, we address the various payment methods below commonly used in the mining activities of cryptoassets.

A PPS payment method typically sees the CSP receiving payments for its contributions of computing resources based on the expected block subsidy that the mining pool expects to earn based on the CSP’s contributions to the mining pool.

A FPPS payment method typically sees the CSP receiving payments for its contributions of computing resources based on the expected block subsidy and the expected transactions fees that the mining pool expects to earn based on the CSP’s contributions to the mining pool.

For both the PPS and the FPPS payment methods, even though a CSP may receive a payment based on the expected block subsidy and/or transaction fees, where there is a subsequent adjustment made to such payments, the payment method in those circumstances would give indication that the CSP is sharing in the risk of the success of the mining activities of the group. With regards to adjustments to payments, it is important to note what constitutes an adjustment to a payment and what constitutes a change to a method of calculating a future payment. Consider an example where a CSP is paid under a payment method that sees the CSP receive a payment on June 1st that is calculated based on an “X” value as it pertains to the use of CSP’s computing resources that would give rise to expected block subsidies and/or transaction fees for the mining pool. The payouts for contributors of computing resources to the mining pool are adjusted on a daily basis and on June 2nd the payout amounts are modified to be calculated based on a “Y” value as it pertains to the use of CSP’s computing resources that would give rise to expected block subsidies and/or transaction fees for the mining pool. If a CSP’s payments based on the “X” value received for its June 1st contributions are subsequently adjusted to reflect the June 2nd payout based on the “Y” value, this would be considered an adjustment to the payment and the initial payment received by the CSP on June 1st is considered an advanced payment whereas the adjustment indicates a payment method that is based on the actual block subsidy and/or transaction fees received by the mining pool. This type of payment arrangement indicates that the CSP shares in the risk of the success of the mining activities of the group. If, however, there is no adjustment to the CSP’s June 1st payment and rather the adjusted payout based on the “Y” value only applies to payments on June 2nd and thereafter, there is no adjustment to the CSP’s payments, and this would not give indication that the CSP is sharing in the risk of the success of the mining activities of the group.

For both the PPS and the FPPS payment methods where there are no such adjustments made to these payments, this payment method can give indication that the CSP is not sharing in the risk of the success of the mining activities of the group. This indication is not determinative and must be supported by the agreements between the parties. Typically, an agreement between a CSP and an Operator in respect of the mining activities with regards to a mining pool will be governed by the general terms and conditions of the mining pool. These terms and conditions are ordinarily available on the website for the particular mining pool. Some pools may require other agreements between the CSP and the Operator to be entered into. In other circumstances, certain CSPs may be in a position to enter into separate agreements with an Operator under which separate terms and conditions are in place that override the general terms and conditions on the website with respect to the mining pool. The agreements between the parties will ultimately determine whether a CSP shares in the risk of the success of the mining activities of the group.

With regards to the PPLNS and PPS+ payment methods, the nature of the payment methods indicates that the CSP shares in the risk of the success of the mining activities of the group. Under the PPLNS payment method, the CSP receives payment based on the actual block subsidy earned by the mining pool. Under the PPS+ payment method, although the CSP receives payments based on the expected block subsidy earned by the mining pool, the CSP also earns payments based on the actual transaction fees earned by the mining pool. Under both methods, the CSP shares in the risk, to an extent, in the success of the mining activities of the group.

In addressing these key factors towards making a determination in respect of a specific arrangement or scenario, it is important to understand that the payment methods and the other factors of the arrangements between the parties must be assessed based on the specific period in question. The cryptoasset mining industry is an ever-evolving industry. In that regard, where the payment methods or the terms and conditions of the agreements between the parties have changed over time, the GST/HST treatment(s) applicable in respect of a particular reporting period must be determined based on the specific arrangements that were in place during the relevant reporting period.

Your interpretation request was limited to transactions that occurred after February 4, 2022. Accordingly, our comments below are limited to those circumstances. […].

Scenario 1

In this scenario, we understand the following from the information that you have provided:

• Company A is a corporation that is incorporated and operates […][outside Canada] and is an Operator of a mining pool;
• Company A does not use or own substantial machinery or equipment in Canada at any time. Company A does not have a right, lease or licence in respect of a CSP’s computer equipment;
• A CSP contributes its computing resources to a mining pool operated by Company A in exchange for payments under the FPPS payment method. The payment that the CSP receives is based on the expected block subsidy and expected transaction fees that that the mining pool is expected to earn on a particular blockchain network.
• A CSP receives payment in the form of [cryptoasset] based on the estimated revenue calculation […]. The calculation factors in a CSP’s particular pool rate;
• A CSP’s payment is not tied to the success of the actual performance of the mining pool. Payments are not based on the actual block subsidy and actual transaction fees received by the mining pool;
• Company A’s payment processor runs every hour and makes automatic payments for accounts that meet the minimum payment threshold. A CSP receives payment irrespective of Company A’s success during any given hour;
• Under Company A’s terms and conditions, Company A acknowledges that it is purchasing hash rate from the CSP and has exclusive control over the mining pool and the purchased hash rate.
• Company A is known to the CSP and the CSP and Company A deal with each other at arm’s length.

In these circumstances, the CSP is paid for the contribution of its computing resources during a specific period of time based on the expected block subsidy and the estimated transactions fees. From the information provided, there is no indication that there may be adjustments to the payments that the CSP receives such that the CSP would share in the risk of the success of the mining activities of a mining group. In a FPPS payment arrangement, generally the Operator bears the risk associated with mining a block […]. There is indication from Company A’s terms and conditions that supports that the Operator would bear the risk of the success of the mining activities of a mining group. In these circumstances, to the extent that the rest of the terms and conditions and any other specific agreements between the CSP and the Operator support that the CSP does not share in the risk of the success of the mining activities of a mining group and that the CSP is making a supply to the Operator, then subsection 188.2(5) applies to the CSP’s mining activities. Therefore, the general GST/HST rules would apply to the supply made from the CSP to the Operator and the CSP would be entitled to claim ITCs on the GST/HST paid on expenses that relate to the making of these supplies.

Scenario 2

In this scenario, we understand the following from the information that you have provided:

• Company B is a corporation that is incorporated and operates [outside Canada] and is an Operator of a mining pool;
• Company B does not own or use substantial machinery or equipment in Canada at any time. In particular, Company B does not have a right, lease or licence in respect of a CSP’s computer equipment;
• A CSP contributes its computing resources to a mining pool operated by Company B in exchange for payments under the FPPS payment method. The payment that the CSP receives for its contribution of computing resources is based on the expected block subsidy and expected transaction fees that the mining pool expects to earn on a particular blockchain network;
• A CSP’s earnings are calculated on a daily basis from midnight-to-midnight UTC time by Company B, irrespective of the performance of the mining pool on any given day. Company B makes payments to a CSP one hour after calculating the CSP’s earning; and
• A CSP does not receive payments that true-up the actual block subsidies and actual transaction fees received when the mining pool successfully mines a cryptocurrency.
• Company B is known to the CSP and the CSP and Company B deal with each other at arm’s length.

[…], in these circumstances, in a FPPS payment arrangement, generally the Operator bears the risk associated with mining a block and the CSP does not bear any of the risks. From the information provided, there is no indication that there may be adjustments to the payments that the CSP receives such that the CSP would share in the risk of the success of the mining activities of a mining group. In these circumstances, to the extent that the agreements between the CSP and the Operator including the terms and conditions for taking part in the mining pool, support that the CSP does not share in the risk of the success of the mining activities of a mining group and that the CSP is making a supply to the Operator, then subsection 188.2(5) applies to the CSP’s mining activities. Therefore, the general GST/HST rules would apply to the supply made from the CSP to the Operator and the CSP would be entitled to claim ITCs on the GST/HST paid on expenses that relate to the making of these supplies.

Scenario 3

In this scenario, we understand the following from the information that you have provided:

• Company C is a corporation that operates outside of Canada and is an Operator of a mining pool;
• Company C does not have a fixed place of business in Canada through which they make supplies;
• Company C does not own or use substantial machinery or equipment in Canada at any time. In particular, they do not have a right, lease or licence in respect of the CSP’s computer equipment;
• The CSP contributes its computing resources to a mining pool operated by Company C in exchange for payments under the FPPS payment method. The payment that the CSP receives for its contribution of computing resources is based on the expected block subsidy and expected transaction fees that the mining pool expects to earn on a particular blockchain network; and
• CSP’s payments are not based on the actual block subsidy and actual transaction fees received by the mining pool. The terms of use for the mining pool specifies that a CSP is awarded for the computational power that the CSP provides whether or not the contribution of that computational power results in the mining pool generating any block rewards or transaction. A CSP’s payment is calculated by reference to the hash rate that the CSP contributes during a settlement cycle, which runs from midnight-to-midnight UTC.
• Company C is known to the CSP and the CSP and Company C deal with each other at arm’s length.

[…], in these circumstances, in a FPPS payment arrangement, generally the Operator bears the risk associated with mining a block and the CSP does not bear any of the risk. From the information provided, there is no indication that there may be adjustments to the payments that the CSP receives such that the CSP would share in the risk of the success of the mining activities of a mining group. In these circumstances, to the extent that the agreements between the CSP and the Operator including the terms and conditions for taking part in the mining pool, support that the CSP does not share in the risk of the success of the mining activities of a mining group and that the CSP is making a supply to the Operator, then subsection 188.2(5) applies to the CSP’s mining activities. Therefore, the general GST/HST rules apply to the supply made from the CSP to the Operator and the CSP would be entitled to claim ITCs on the GST/HST paid on expenses that relate to the making of these supplies.

Scenario 4

In this scenario, we understand the following from the information that you have provided:

• Company D operates […][outside Canada] and is an Operator of a mining pool;
• Company D does not have a fixed place of business in Canada through which they make supplies;
• Company D does not own or use substantial machinery or equipment in Canada at any time. In particular, they do not have a right, lease or licence in respect of the CSP’s computer equipment;
• The CSP contributes its computing resources to the mining pool operated by Company D;
• The CSP that contributes its computing resources to the mining pool operated by Company D has the option of selecting either a FPPS or PPLNS payment arrangement for [cryptoasset] mining.
• Company D is known to the CSP and the CSP and Company D deal with each other at arm’s length.

4. (a) Where the CSP chooses to be paid through the FPPS payment method:

• the payment that the CSP receives for its contribution of computing resources is based on the expected block subsidy and expected transaction fees that the mining pool expects to earn; and
• […] the actual income of FPPS is not affected by the mining pool’s luck.

[…], in these circumstances, in a FPPS payment arrangement, generally the Operator bears the risk associated with mining a block and the CSP does not bear any of the risk. From the information provided, there is no indication that there may be adjustments to the payments that the CSP receives such that the CSP would share in the risk of the success of the mining activities of a mining group. In these circumstances, to the extent that the agreements between the CSP and the Operator including the terms and conditions for taking part in the mining pool, support that the CSP does not share in the risk of the success of the mining activities of a mining group and that the CSP is making a supply to the Operator, then subsection 188.2(5) applies to the CSP’s mining activities. Therefore, the general GST/HST rules apply to the supply made from the CSP to the Operator and the CSP would be entitled to claim ITCs on the GST/HST paid on expenses that relate to the making of these supplies.

4. (b) Where the CSP chooses to be paid through the PPLNS payment method:

• Payments to the CSP are based on the number of block rewards earned by the mining pool; and
• The CSP receives payments in the form of [cryptoasset] based on the payment calculation for the contribution of the CSP’s computing resources. This calculation factors in a CSP’s particular mining pool rate.

In situations where a CSP contributes its computing resources to a mining pool and receives payment under a PPLNS payment method, the CSP shares in the risk of the success of the mining activities of a mining group. In these circumstances, the CSP is included in the mining group operated by Company D. Accordingly, subsection 188.2(5) does not apply. Subsection 188.2(4) would apply deeming both the mining activity and mining payment not to be a supply. No GST/HST would be required to be collected in respect of the provision of the mining activities and no ITCs can be claimed in respect of property or services acquired, imported or brought into a participating province for consumption, use or supply in the course of, or in connection with, the provision of the mining activities.

Scenario 5

In this scenario, we understand the following from the information that you have provided:

• Company E is a corporation that operates outside of Canada and is an Operator of a mining pool;
• Company E does not have a fixed place of business in Canada through which they make supplies;
• Company E does not use or own substantial machinery or equipment in Canada at any time. In particular, they do not have a right, lease or licence in respect of a CSP’s computer equipment;
• The CSP contributes its computing resources to the mining pool operated by Company E in exchange for payments under the PPLNS payment method. The payment that the CSP receives for its provision of computing services is connected to the number of block rewards earned by the mining pool;
• Company E’s payment processor runs every hour and makes automatic payments for accounts that meet the minimum payment threshold; and
• Company E is known to the CSP and the CSP and Company E deal with each other at arm’s length.

In situations where a CSP contributes its computing resources to a mining pool and receives payment under a PPLNS payment method, the CSP shares in the risk of the success of the mining activities of a mining group. In these circumstances, the CSP is included in the mining group operated by Company E. Accordingly, subsection 188.2(5) does not apply. Subsection 188.2(4) would apply deeming both the mining activity and mining payment not to be a supply. No GST/HST would be required to be collected in respect of the provision of the mining activities and no ITCs can be claimed in respect of property or services acquired, imported or brought into a participating province for consumption, use or supply in the course of, or in connection with, the provision of the mining activities.

Scenario 6

In this scenario, we understand the following from the information that you have provided:

• Company F is a corporation that operates outside of Canada and is an Operator of a mining pool;
• Company F does not have a fixed place of business in Canada through which they make supplies;
• Company F does not use or own substantial machinery or equipment in Canada at any time. In particular, they do not have a right, lease or licence in respect of the CSP’s computer equipment; and
• The CSP contributes its computing resources to the mining pool operated by Company F in exchange for payments under the PPS+ payment method. Under the PPS+ payment method, the CSP receives payments that are a combination of the expected block subsidy that the mining pool expects to earn and the actual transaction fees earned by the mining pool.
• Company F is known to the CSP and the CSP and Company F deal with each other at arm’s length.

In situations where a CSP contributes its computer resources to a mining pool and receives payment under a PPS+ payment method, the CSP shares in the risk of the success of the mining activities of a mining group. In these circumstances, the CSP is included in the mining group operated by Company F. Accordingly, subsection 188.2(5) does not apply. Subsection 188.2(4) would apply deeming both the mining activity and mining payment not to be a supply. No GST/HST would be required to be collected, in respect of the provision of the mining activities and no ITCs can be claimed in respect of property or services acquired, imported or brought into a participating province for consumption, use or supply in the course of, or in connection with, the provision of the mining activities.

DISCLAIMER

In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1-4, Excise and GST/HST Rulings and Interpretations Service, the interpretation(s) given in this letter, including any additional information, is not a ruling and does not bind the Canada Revenue Agency (CRA) with respect to a particular situation. Future changes to the ETA, regulations, or the CRA’s interpretative policy could affect the interpretation(s) or the additional information provided herein.

CONTACT

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 343-553-3874.

Should you have additional questions on the interpretation and application of the GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.

Sincerely,

Doris Rist
Industry Sector Specialist
Strategic and Emerging Issues Unit
General Operations and Border Issues Division
GST/HST Rulings Directorate