On May 20, 2021, the Federal Court of Appeal released its much-anticipated decision in CIBC v The Queen, 2021 FCA 96, upholding the ruling of the Tax Court of Canada that Aeroplan provided promotional and marketing services to CIBC subject to GST. This case provides much needed guidance on whether GST/HST applies to payments made in relation to a business’ participation in rewards and loyalty programs.


To help drive up its credit card and retail banking business, CIBC, a large, national Canadian bank, entered into an agreement with Air Canada in October 2003 in relation to the Aeroplan Miles Program. In 2004, the agreement was assigned to Aeroplan. Under the agreement, Aeroplan would promote and refer Aeroplan members and other members of the public to apply for CIBC’s credit cards. Holders of CIBC’s credit cards would be given Aeroplan Miles, which could then be redeemed for flights, merchandise, or gift cards. In exchange, CIBC would pay Aeroplan a fee, computed using a formula based on the number of Aeroplan Miles issued.

Between the period of March 25, 2005, to February 26, 2007, CIBC made payments to Aeroplan along with GST, but later tried to recover the GST by submitting a claim for rebate totalling over $44 million. The bank’s rationale was that the supplies made by Aeroplan to CIBC were exempt financial services and therefore not taxable supplies under the Excise Tax Act. On March 25, 2011, the Minister of National Revenue issued a Notice of Assessment to CIBC, rejecting the bank’s rebate in full. The bank then proceeded to appeal the assessment to both the Tax Court and later to the Federal Court of Appeal.


The main issue before Justice Visser of the Tax Court was whether the Aeroplan supplies were considered taxable supplies of promotional and marketing services subject to GST, or exempt supplies of “gift certificates” under s.181.2 of the Excise Tax Act.

At trial, rather than advancing its position that supplies made by Aeroplan to CIBC were exempt financial services, the Canadian tax litigation lawyer for CIBC contended that it was paying for Aeroplan Miles, which were gift certificates deemed not to be a supply subject to GST under s.181.2 of the Act. Not surprisingly, the Canada Revenue Agency (CRA) took the opposite position, that the Aeroplan supplies were not gift certificates. In the alternative, the CRA submitted that the supply was a promotional or marketing service.

Following a thorough examination of the content and wording of the agreement between the parties as well as the invoices issued by Aeroplan to CIBC, Justice Visser found that the two types of documents support the conclusion that Aeroplan provided a single compound supply of promotional and marketing services to CIBC. Therefore, he concluded that Aeroplan supplies were taxable supplies.

Although the above conclusion was sufficient to dispose of the appeal, Justice Visser went on further to explore whether Aeroplan supplies were gift certificates. Justice Visser explained that gift certificates must have a “stated monetary value expressed on its face physically or retrievable electronically” (para 80). He also noted that a gift certificate under s. 181.2 of the Act does not extend to a device that allows an individual to redeem it for a certain product or service. Accordingly, Justice Visser held that Aeroplan Miles were not considered “gift certificates”. He explained that though a valuation process can be used to determine the value of Aeroplan Miles, such a valuation process was not equivalent to having a stated monetary value on their face or retrievable electronically.


Unsatisfied with the Tax Court’s ruling, the experienced Canadian tax litigation lawyer for CIBC then appealed to the Federal Court of Appeal. The majority of the Federal Court of Appeal endorsed the lower court’s ruling and found that the Tax Court judge did not err in his interpretation and finding. Accordingly, the majority court held that the predominant supply made by Aeroplan to CIBC was the supply of promotional and marketing services. The majority court, however, did not determine whether Aeroplan Miles are considered gift certificates within the meaning of the Act.


Justice Strata disagreed with the majority’s decision. Rather than exclusively focusing on the wording of the contract, he explained that the practical, commercial substance of the supply must also be accounted for to determine the predominant element of a single compound supply for GST purposes. According to Justice Strata, the test to determine the predominant element is to find “the element that gives the supply commercial efficacy or, in other words, the reason for consideration” (para 76). Based on his analysis, Justice Strata found that the predominant element was the right to allocate Aeroplan Miles.

Because Justice Strata found that the predominant element was the right to allocate Aeroplan Miles, the next issue he addressed was whether the Miles constitute gift certificates under s. 181.2 of the Excise Tax Act. As the term “gift certificates” is not defined in the Act, he turned to the ordinary meaning of the term and explained that it is a device used as “full or partial consideration for a supply offered by a supplier” (para 87). In this vein, Justice Strata concluded Aeroplan Miles function as gift certificates since they are an exchange device used for consideration for property or service. With Aeroplan Miles, accumulation partners purchase the Miles to reward their customers. Aeroplan permits exchange of Miles for airline tickets, merchandise, or gift cards on redemption. Given the foregoing, Justice Strata concluded that CIBC paid consideration for the Miles and the Miles constitute gift certificates within the meaning of the Excise Tax Act. Accordingly, CIBC’s purchase of the Aeroplan Miles was not a taxable supply.


If CIBC appeals the case and the Supreme Court of Canada grants leave to appeal, the applicability of GST to businesses participating in loyalty programs may change and Justice Strata’s dissenting opinion may carry more weight. However, in the absence of such an event, the majority ruling of the Federal Court of Appeal provides the current state of law.  Based on the majority court’s decision, what we can take-away is that businesses participating in rewards and loyalty programs similar to the circumstances between CIBC and Aeroplan are required to pay GST. However, contractual language may help clarify the scope and nature of supplies provided by one party to another, thereby influencing the GST treatment. If you operate a business and are planning to participate in a loyalty or rewards program, contact our tax law office to speak to one of our top Canadian tax lawyers for guidance.

FAQ: Federal Court of Appeal

Most goods and services supplied in or imported into Canada, in other words sales, are considered a taxable supply. Suppliers of taxable supplies can claim input tax credits for amounts of GST/HST they pay to their suppliers. Examples include car repairs, sale of new housing, legal and accounting services, hotel accommodation, and rights to operate franchises.
Exempt supplies, as its name implies, are supplies in which GST/HST is not applied. As such, input tax credits generally cannot be claimed. Examples include medical and dental services, many educational services, and most financial services.