Words and Phrases - "relates to"
Canadian Imperial Bank of Commerce v. The King, 2024 TCC 160
In 2001 (before the three annual fiscal periods in issue) the appellant (CIBC) outsourced part of its Visa-card transaction processing and payment services to an arm’s length non-resident (“GPDI”) so that, in a typical transaction in which a Canadian cardholder presented their CIBC Visa card to a Canadian merchant, GPDI would process the point-of-sale information received from the merchant and transmit it to CIBC for credit authorization, transmit the authorization (assuming no “decline”) back to the merchant and send this and the other day’s transactions to VISA for clearing, following which there was a process involving CIBC, GPDI and VISA by which the settlement funds were paid to the merchant. GPDI would charge the merchant a merchant discount fee of, say, 2%, and pay CIBC an interchange fee of, say, 1.5% in consideration for CIBC’s authorization and payment services.
Before concluding that the interchange fees were not zero-rated on the basis of the exclusion in VI‑IX‑1(a)(ii) for a service that “relates to (a) a debt that arises from … (ii) the lending of money that is primarily for use in Canada”, Sommerfeldt J found that:
- Regarding the “relates to” test, “there only needs to be ‘some connection’ between the interchange services and the debt described in the carve‑out, and the interchange services do not need to be ancillary or incidental to the debt” and the “Slattery, Stantec and Miedzi Copper cases indicate that the phrases relating to, in relationship to, and, by extension, relates to, are to be given a wide or broad interpretation, and that a narrow view is to be avoided” (para. 54).
- In this context the verb “lend” should have “a broad meaning (recognizing that a loan arises when the lender, at the request of the borrower, pays money to a third party in satisfaction of an obligation owed by the borrower to the third party)” (para. 74), so that “when a Cardholder used a CIBC Visa Card in respect of a transaction, CIBC loaned to the Cardholder, and the Cardholder borrowed from CIBC, the monetary amount of the transaction” (para. 80).
- “in a tax context, the word primarily generally means (among other things) principally, mainly, most importantly, or more than 50%” (para. 107).
- “the loaned money was used to pay merchants located in Canada” (para. 104) so that “the money paid by CIBC indirectly to the merchants (i.e., through the Visa Payment System), in satisfaction of the Cardholders’ obligations to the merchants, was loaned money that was primarily for use in Canada” (para. 107).
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Excise Tax Act - Section 280 - Subsection 280(1) - Paragraph 280(1)(a) | due diligence defence established based on reasonable filing position | 55 |
Potash Corporation of Saskatchewan Inc. v. The Queen, 2022 TCC 75, aff'd 2024 FCA 35
The taxpayer, which produced and sold potash from mines in Saskatchewan, was subject to both a profit tax and to the making of “base payments” under the Mineral Taxation Act, 1983 (Saskatchewan). In finding that the base payments made in its 1999 to 2002 taxation years did not satisfy the requirement under s. 18(1)(a) of having been incurred for the purpose of producing income from the taxpayer’s business, Owen J applied the principle that since an income tax is imposed on the profits generated by a business rather than being incurred to generate those profits, it cannot satisfy this purpose test. Although the base payments in fact were computed in substantial part based on potash sales made in the year, he indicated that such sales had been chosen “as a proxy for income to ensure that a minimum amount of tax would be collected in respect of such potash even if the producer did not have profits for the year” (para. 72).
Owen J went on to find that deduction of the base payments was also denied for those taxation years by former s. 18(1)(m), which relevantly applied if they could "reasonably be regarded as being in relation to” the acquisition, development or ownership of a Canadian resource property, or the production in Canada to any stage that is not beyond the prime metal stage or its equivalent of minerals from a mineral resource located in Canada. After noting (at para. 79) that the base payment “is a tax on the producer selling or otherwise disposing of its potash,” he stated (at para. 86):
[A] “sale or other disposition of” potash is an activity that relates to the production of that potash. There is a direct and immediate connection between the production of potash and the subsequent sale or disposition of that potash.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Income-Producing Purpose | deductibility of Saskatchewan potash tax “base payments” denied given that sales they were applied to were a proxy for income | 357 |