13 May 2026 IFA Roundtable Q. 2, 2026-1087921C6 - Paragraph 95(3)(b) and Cryptocurrency

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: 1) Whether cryptocurrencies held on income account in connection with a cryptocurrency trading business of a Canadian taxpayer would be considered "goods" for purposes of paragraph 95(3)(b). 2) If yes, whether various investment and trading execution services performed by a foreign affiliate of the taxpayer in connection with the cryptocurrency business would be characterized as "services performed in connection with the purchase or sale of goods" within the meaning of paragraph 95(3)(b), such that paragraph 95(2)(b) would not recharacterize the foreign affiliate's income from those services as income from a business other than an active business.

Position: 1) Cryptocurrencies are intangible (incorporeal) property and therefore do not constitute "goods" for purposes of paragraph 95(3)(b). 2) Not applicable given the answer to 1.

Reasons: 1) Based on textual, contextual and purposive analysis, including previous position that "goods" for purposes of subsection 95(3) means tangible moveable property. 2) Same.

2026 IFA Annual Conference – CRA Roundtable

Question 2 – Paragraph 95(3)(b) and Cryptocurrency

Background

• A corporation resident in Canada (“Canco”) carries on a cryptocurrency trading business in Canada.
• Cryptocurrencies are intangible, or, for civil law purposes, incorporeal property.
• A wholly owned foreign affiliate of Canco (“FA”) provides investment management and trading execution services to Canco in relation to its cryptocurrency trading business under an investment services agreement.
• The consideration paid by Canco to FA for these services is consistent with Canadian transfer pricing rules in section 247 of the Act and is deductible in computing Canco’s income from its cryptocurrency trading business in Canada.

For the purposes of paragraph 95(2)(b), paragraph 95(3)(b) provides that “services” does not include “services performed in connection with the purchase or sale of goods”.

Question

At the 2022 IFA Roundtable, CRA stated its position that “goods” in paragraph 95(3)(b) refers to tangible moveable property, with the result that services connected to the sale of real property were not within the carve out. That position relied, in part, on judicial commentary in an unrelated statutory context and on dictionary definitions. In light of paragraph 95(2)(b) of the Act, and the CRA’s 2022 IFA Roundtable response on the meaning of “goods” in paragraph 95(3)(b), please comment on the following:

- Will the CRA confirm whether “goods” in paragraph 95(3)(b) can include cryptocurrencies?

- If so, in these circumstances, are the investment management and trading execution services provided by FA properly characterized as “services performed in connection with the purchase or sale of goods” within the meaning of paragraph 95(3)(b), such that paragraph 95(2)(b) would not recharacterize FA’s income from those services as income from a business other than an active business?

CRA Response

Paragraph 95(2)(b) provides that where certain conditions are met:

“the provision, by a foreign affiliate of a taxpayer, of services or of an undertaking to provide services

(i) is deemed to be a separate business, other than an active business, carried on by the affiliate, and any income from that business or that pertains to or is incident to that business is deemed to be income from a business other than an active business, to the extent that the amounts paid or payable in consideration for those services or for the undertaking to provide services”

Subsection 95(3) excludes various activities from being considered “services” for purposes of paragraph 95(2)(b). One of the exclusions is for “services performed in connection with the purchase or sale of goods” as outlined in paragraph 95(3)(b).

At the 2022 IFA Conference CRA round table (document 2022-0926191C6), the CRA stated that the word “goods” in paragraph 95(3)(b) refers to tangible moveable property, such that services performed in connection with the purchase and sale of immovable or real property are not in connection with the sale of “goods”, therefore are a “service” to which paragraph 95(2)(b) is applicable.

The meaning of “goods” for purposes of the Act has been developed through, and defined in, case law and legal dictionaries. These sources are generally consistent with the meaning as tangible moveable property.

That interpretation of “goods” is also consistent with what was and remains the legislative intent of paragraph 95(3)(b). When paragraph 95(3)(b) was originally introduced in 1974, Budget Clause (74)(i)(iii) provided that “services” does not include “services performed in connection with the purchase for import or the sale for export of goods”(footnote 1). That suggests that the focus of this carve out was on services relating to the importation and exportation of goods. Paragraph 95(3)(b) as enacted is not limited to importation or exportation activities but is still focused on activities which could not reasonably be performed in Canada.

The Customs Act defines “goods” as follows: “goods for greater certainty include conveyances, animals and any document in any form”. The word “goods” is defined in subsection 123(1) of the Excise Tax Act as having the same meaning as in the Customs Act. The historical context of the exception in paragraph 95(3)(b), and the objectives of that paragraph, make that the Customs Act relevant. This generally supports the view that “goods” means tangible moveable property that may be imported or exported.

In the same spirit, the meaning of “goods” as tangible moveable property is further reflected by the context provided by paragraph 95(3)(a) dealing with the transportation of persons and goods.

The fact that paragraph 95(3)(d) uses the adjective “tangible” attached to the word property but that paragraph 95(3)(b) does not include a similar “tangible” qualifier might suggest that “goods” extends to intangible property in the later. The exception in paragraph 95(3)(d) is in respect of:

“the manufacturing or processing outside Canada, in accordance with the taxpayer's specifications and under a contract between the taxpayer and the affiliate, of tangible property, or for civil law corporeal property, that is owned by the taxpayer if the property resulting from the manufacturing or processing is used or held by the taxpayer in the ordinary course of the taxpayer's business carried on in Canada.”

In Canadian Wirevision v. The Queen (footnote 2) (“Canadian Wirevision”), the Court addressed the meaning of “goods” in the domestic context of a manufacturing tax credit. The FCA concluded that the taxpayer, which received television and radio signals and relayed them to its customers, was in the business of providing services and not selling goods since “the signals were not goods within the meaning of the relevant provision of the Income Tax Act since they were not tangible, movable property”. Similarly, in Allarcom Pay Television Limited v. The Queen (footnote 3) (“Allarcom”), the taxpayer argued that it was engaged in the business of manufacturing and processing of goods for sale or lease within the meaning of section 125.1 of the Act when delivering movies, on a pay-per-view basis, by means of electronic signals to cable companies that then distributed those signals to their customers. The TCC in Allarcom referred to the Canadian Wirevision decision and came to the same decision based on the meaning of “goods”, which was upheld by the FCA although on slightly different grounds.

The adjective “tangible” attached to property in paragraph 95(3)(d) appears to be in line with the overall scheme of the manufacturing and processing provisions as interpreted by the Courts in those cases.

The better view generally is that cryptocurrencies are not "goods” for purposes of paragraph 95(3)(b).

In addition, the exceptions in subsection 95(3) are to be read as supporting the objective of paragraph 95(2)(b). The latter, in turn, has an anti-base erosion role within the foreign affiliate system. Paragraph 95(2)(b) deems service fee income earned by a foreign affiliate, if deductible in computing business income of relevant Canadian taxpayer, to be income from a business other than an active business where its conditions are met.

When subsection 95(3) was first enacted, it contained only paragraphs (a) and (b). The Department of Finance clarified the overall objective of those provisions in the September 14, 2001 comfort letter announcing the intention to exclude from paragraph 95(2)(b) the transmission of electronic signals or electricity along a transmission system:

“In particular, paragraph 95(3)(a) ensures that “the transportation of persons or goods” is excluded from constituting “services” for the purpose of paragraph 95(2)(b) . The provisions of paragraph 95(3)(a) do not offend paragraph 95(2)(b), as there is no erosion of the tax base or diversion of income from Canada if the services are required by their very nature to be performed outside Canada. Specifically, the transportation of persons or goods outside Canada is, by its very nature, a service that must be performed outside Canada and is therefore markedly different from services that otherwise could have been performed in Canada.”

The exceptions subsequently added in paragraphs 95(3)(c) and (d) were enacted to deal with specific situations which were considered to be consistent with the objective of paragraph 95(2)(b).

The services performed by a foreign affiliate to its Canadian parent company in connection with the purchase or sale of cryptocurrency would likely not fall within the exception in paragraph 95(3)(b), nor its interpretation in light of the context and purpose of that provision.

Ann Kippen
2026-108792
May 13, 2026

FOOTNOTES

Note to reader: Because of our system requirements, the footnotes contained in the original document are shown below instead:

1. The Notice of Ways and Means Motion to Amend the Income Tax Act, May 1974, clause (74)(i)(iii).

2. Canadian Wirevision Ltd. v The Queen, 79 DTC 5101 (FCA), affirming 78 DTC 6113 (FCTD)

3. Allarcom Pay Television Limited v. The Queen, 98 DTC 6646 (Federal Court of Canada – Appeal Division), affirming TCC decision in 97 DTC 1558.