The Court’s Interpretation About the GST Implications on Loyalty Rewards Programs

  • October 11, 2024
  • Neti Jhatakia, EY Canada

The Goods and Services Tax (“GST”) is a significant consideration for businesses in Canada, particularly when it comes to transactions involving royalty points. Royalty points, often earned through customer loyalty programs, can be used to redeem goods or services, raising questions about their tax treatment.

Royalty points are points accrued by customers based on their spending which can later be redeemed for goods or services.

This article explores the treatment of royalty points based on the recent rulings provided by the Tax Court of Canada (“TCC”) in the matter of Toronto-Dominion Bank v. His Majesty the King (“TD ruling”) and Federal Court of Appeal (“FCA”) in the matter of Canadian Imperial Bank of Commerce v. Canada (“CIBC ruling”).[1]