Financial Instrument

Administrative Policy

CBAO National Commodity Tax, Customs and Trade Section – 2014 GST/HST Questions for Revenue Canada, Q. 31

futures contracts on emission allowances

Is an emission allowance (e.g., a carbon offset) a commodity for GST/HST purposes? How is the trading of futures or options contracts on emissions allowances that are settled only in cash (or that may also be settled by delivery of the underlying emission allowance) treated? CRA responded:

An emission allowance is a right and…is considered intangible personal property. Thus, an option or contract [thereon]…would not be considered an option or a contract for the future supply of a commodity… .

…Where the option or contract can only be settled in money it may be considered a financial instrument.

20 March 2013 Interpretation Case No. 100956

In finding that broker fees and other fees relating to commodity trades were consideration for taxable supplies, CRA stated:

It does not appear that the Brokers who make trades in the over the counter…markets are trading on a recognized exchange. Furthermore, in some instances, where the agreements provide for the delivery of an actual physical commodity, the supply is not a financial instrument….Therefore, the Brokers providing the services in respect of these contracts to USCO and CANCO would not be considered to be "arranging for" financial services and consequently, the supplies provided by the Brokers would not be financial services.

1 December 1994 P-170 "Debt Security and Contingent Amounts"

The purchase of a right to receive investment management fees to be earned by the assignor did not qualify as the purchase of a debt security because "a 'right to be paid money' does not include a contingent right". GST Memorandum (New Series), 17.1, dated April 1999 "Definition of 'Financial Instrument'"