Definition of Financial Instrument

GST/HST memorandum 17-1
July 2026

This version replaces the one dated April 1999. This memorandum has been updated to include the definition of virtual payment instrument and certain rights in respect of a corporation without share capital.

Except as otherwise noted, all statutory references in this publication are to the provisions of the Excise Tax Act (ETA). The information in this publication does not replace the law found in the ETA and its regulations. Although correct at the time of issue, this publication may not have been updated to reflect subsequent legislative changes.

If this information does not completely address your particular situation, you may wish to refer to the ETA or relevant regulation, or call GST/HST Rulings at 1‑800‑959‑8287 for additional information. If you require certainty with respect to any particular GST/HST matter, you may request a ruling. GST/HST Memorandum 1-4, Requesting a GST/HST Ruling or Interpretation, explains how to obtain a ruling or an interpretation.

If you are located in Quebec and wish to request a ruling related to the GST/HST, please call Revenu Québec at 1‑800‑567‑4692. You may also visit the Revenu Québec website at revenuquebec.ca to obtain general information.

For listed financial institutions that are selected listed financial institutions (SLFIs) for GST/HST or Quebec sales tax (QST) purposes or both, whether or not they are located in Quebec, the CRA administers the GST/HST and the QST. If you wish to make a technical GST/HST or QST enquiry related to SLFIs, please call 1‑855‑666‑5166.

GST/HST rates

Reference in this publication is made to supplies that are subject to the GST or the HST. The GST/HST rates are those that were in effect at the time of publishing. For the list of all applicable GST/HST rates (current and historic), go to GST/HST calculator (and rates).

If you are uncertain as to whether a supply is made in a participating province, refer to GST/HST Memorandum 3-3-2, Place of Supply in a Province – Overview.

Table of contents

• General
• Definition of financial instrument
  • Debt security
    • Late payment charges
    • Exclusions from the definition of debt security
  • Equity security
  • Rights in respect of a corporation without share capital
  • Insurance policies
    • Construction bonds
    • Exclusions from the definition of insurance policy
  • Interest in a partnership, trust or estate of a deceased individual
  • Precious metals
    • Refiners
    • Non-precious metals
    • Supplies to non-residents
    • Imports
  • Options or contracts traded on recognized commodity exchanges
  • Virtual payment instruments
  • Prescribed instruments
  • Guarantees, acceptances, or indemnities
  • Options and contracts

General

1. The definition of financial instrument in subsection 123(1) is primarily relevant for the definition of financial service in subsection 123(1), as a financial service generally involves a transaction relating to a financial instrument or money. The definition of financial instrument is also relevant for the definition of investment limited partnership found in subsection 123(1), the meaning of financial institution in section 149, and for various other provisions, including the election in section 156 for groups of closely related persons.

2. Supplies of financial services are exempt under Part VII of Schedule V unless specifically listed as zero-rated under Part IX of Schedule VI. Certain services for which fees are charged and which relate to financial instrument transactions are financial services where the transactions also fall within the definition of financial service.

Definition of financial instrument

3. Financial instrument is defined in subsection 123(1) and "means:

• (a) a debt security,
• (b) an equity security,
• (b.1) a right (other than a right as a creditor), whether absolute or contingent, conferred by a corporation that does not have capital divided into shares to receive, either immediately or in the future, an amount that can reasonably be regarded as all or any part of the capital, revenue or income of the corporation,
• (c) an insurance policy,
• (d) an interest in a partnership, a trust or the estate of a deceased individual, or any right in respect of such an interest,
• (e) a precious metal,
• (f) an option or a contract for the future supply of a commodity, where the option or contract is traded on a recognized commodity exchange,
• (f.1) a virtual payment instrument,
• (g) a prescribed instrument,
• (h) a guarantee, an acceptance or an indemnity in respect of anything described in any of paragraphs (a) to (b.1), (d), (e) and (g), or
• (i) an option or a contract for the future supply of money or anything described in any of paragraphs (a) to (h)".

4. The components of the definition of financial instrument are explained below.

Debt security

5. Debt security is defined in subsection 123(1) and "means a right to be paid money and includes a deposit of money, but does not include a lease, licence or similar arrangement for the use of, or the right to use, property other than a financial instrument".

6. Financial obligations representing a right to be paid money are by definition a debt security for GST/HST purposes. A debt security generally includes a deposit of money, debentures, notes, convertible notes, mortgages, treasury bills, or bonds. It also includes book debts and accounts receivable.

Late payment charges

7. A late payment charge occurs where a supplier of property or services charges the recipient (customer) an additional amount if payment for the supply is not made within the time required on the invoice. The late payment charge is consideration for a financial service.

Exclusions from the definition of debt security

8. The payment of money relating to leases, licences or similar arrangements, or the right to use property other than a financial instrument, is specifically excluded from the definition of debt security. Therefore, such a payment is not in respect of a financial instrument. For example, the leasing of commercial property is treated as a supply of that property, and not a debt security, for GST/HST purposes in accordance with subsection 136(1). Similarly, an automobile lease payment, although partially consisting of a financing component, is not consideration for an exempt supply of a financial instrument.

9. A debt security does not include a contingent right. Where a contingent right is involved, a right to be paid money is a possibility but not a certainty. The payment is conditional upon the occurrence or non-occurrence of some future event that may never happen.

Equity security

10. Equity security is defined in subsection 123(1) and "means a share of the capital stock of a corporation or any interest in or right to such a share".

11. A share of capital stock in a corporation representing ownership in the corporation or an interest in or right, claim or title to such a share is a financial instrument for GST/HST purposes.

Rights in respect of a corporation without share capital

12. Paragraph (b.1) was added to the definition of financial instrument in subsection 123(1) and is deemed to have come into force on August 10, 2022. Paragraph (b.1) describes any right, whether absolute or contingent, to receive, either immediately or in the future, an amount that can reasonably be regarded as all or any part of the capital, of the revenue, or of the income, of a corporation that does not have capital divided into shares. However, paragraph (b.1) does not include a right to receive an amount as a creditor.

13. An example of a right described in paragraph (b.1) is a contingent right, analogous to those of corporate shareholders, to receive a portion of a corporation without share capital's income for the year, or a share of the corporation's capital on its dissolution.

Insurance policies

14. Insurance policy is defined in subsection 123(1) and generally refers to:

• (a) a policy or contract of insurance, including life, property and casualty policies, but excluding a warranty contract (as described in paragraph 25 of this memorandum), that is issued by an insurer, including all of the following:
  • (i) a reinsurance policy
  • (ii) an annuity contract or a contract that would be an annuity contract except that the payments under the contract are either of the following:
    • (A) payable on a periodic basis at intervals that are longer or shorter than one year
    • (B) vary in amount depending on the value of a specified group of assets or changes in interest rates
  • (iii) a contract all or part of the insurer’s reserves for which vary in amount depending on the value of a specified group of assets (for example, a segregated fund contract)
• (b) a policy or contract in the nature of accident and sickness insurance, whether the policy is issued or the contract is entered into by an insurer
• (c) certain types of construction bonds (as described in paragraphs 19 to 24 of this memorandum)

15. Insurer is defined in subsection 123(1) and "means a person who is licensed or otherwise authorized under the laws of Canada or a province to carry on in Canada an insurance business or under the laws of another jurisdiction to carry on in that other jurisdiction an insurance business".

16. Generally, an insurance policy is a contract whereby one person undertakes to indemnify another against loss, damage or liability arising from an unknown or contingent event, and applies only to some contingency or act that may occur in the future. It is an agreement by which one party, for a consideration, promises to pay money or its equivalent, or to perform an act valuable to the other party upon destruction, loss or injury of something in which the other party has an insurable interest. For further information on insurance policies and insurance claims, refer to GST/HST Memorandum 17-16, GST/HST Treatment of Insurance Claims.

17. A policy or contract in the nature of accident and sickness insurance pertains to the coverage of eligible health-related expenses such as medical, hospital, nursing, and dental expenses. The policy or contract may also provide coverage for loss of earnings and accidental death or dismemberment. A policy or contract in the nature of accident or sickness insurance is included in the definition of insurance policy, whether or not the policy is issued, or the contract is entered into, by an insurer.

18. Contracts or policies issued by certain organizations that are not insurers, but provide supplementary health insurance in Canada are also generally included in the definition of an insurance policy.

Construction bonds

19. Construction bonds are bid, performance, maintenance, or payment bonds issued in respect of a construction contract. These bonds are generally three-party contracts between a surety company, a contractor, and an owner or developer of a project. The bonds, as a form of financial guarantee, are used in the construction industry to guarantee performance of a construction contract or the payment of suppliers.

20. A bid bond guarantees that the contractor, if selected, will enter into the contract for the bid amount and will provide the required contract security.

21. A performance bond guarantees completion of an obligation under the construction contract.

22. A maintenance bond guarantees against defects in the contractor's workmanship or materials for a period of time following completion of the construction contract.

23. A payment bond guarantees that the subcontractors, labourers, and suppliers on the bonded construction contract will be paid.

24. The issuers of construction bonds (usually surety companies) are normally required to be licensed under the same legislation as insurers. Even though these unique bonds are not normally considered to be contracts of insurance, they do strongly resemble insurance policies. Therefore, for GST/HST purposes, they are treated as insurance and included in the definition of insurance policy.

Exclusions from the definition of insurance policy

25. The definition of insurance policy excludes a warranty in respect of the quality, fitness, or performance of tangible property where the warranty is supplied to a person who acquires the property otherwise than for resale (for example, for personal use) whether or not it is provided by an insurer.

26. Insurance services provided by non-licensed persons are also excluded from the definition of insurance policy except in the case of either of the following:

• (a) accident and sickness insurance (as described in paragraphs 17 and 18 of this memorandum)
• (b) in some instances, construction bonds (as described in paragraphs 19 to 24 of this memorandum)

Interest in a partnership, trust or estate of a deceased individual

27. A partnership is created where two or more persons enter into a relationship to carry on business for profit. A trust is a fiduciary relationship imposed by contract or by law with respect to property or money held by one person for the benefit of one or more persons. The estate of a deceased individual is treated for GST/HST purposes as though the estate were the individual and the individual had not died. A partnership and a trust are treated as persons under the ETA.

28. Any interest or any right in respect of an interest in a partnership, a trust, or the estate of a deceased individual is a financial instrument. This interest or right represents a claim, title or legal share of an investment in a partnership, a trust or the estate of a deceased individual and not in the underlying assets of the partnership, trust, or estate of the deceased individual.

Precious metals

29. Precious metal is defined in subsection 123(1) and "means a bar, ingot, coin or wafer that is composed of gold, silver or platinum and that is refined to a purity level of at least

• (a) 99.5% in the case of gold and platinum, and
• (b) 99.9% in the case of silver".

30. A precious metal in the form of a bar, ingot, or wafer at the required purity level must generally be recognized and accepted for trading on Canadian financial markets. Ordinarily, these bear markings indicating their purity level. They also have an identification mark of the issuing financial institution or refinery. With respect to coins, only those metals at the required purity levels that have been issued by a government authority and that may be used as currency will qualify.

31. Any supply of a precious metal (meeting the definition of precious metal above) is a supply of a financial service and is generally exempt. Metals of this quality are normally investment-related and are usually bought and sold on international exchanges that establish worldwide precious metal prices.

32. Every sale or purchase of gold, platinum, or silver, that does not meet the definition of precious metal above is not considered a supply or purchase of a financial instrument, but rather a supply or purchase of property. Generally, the sale of gold, platinum, or silver in bar, ingot, coin, or wafer form with a purity level of less than 99.5% for gold and platinum, and less than 99.9% for silver is a taxable supply and subject to the GST/HST. The sale of gold, platinum, or silver at the defined purity level, but not in the form of a bar, ingot, coin, or wafer (for example, in granular form) is also generally a taxable supply and subject to the GST/HST.

Refiners

33. A refiner of precious metals is considered to be any person who in the regular course of business converts or refines gold, platinum, or silver regardless of the degree of purity.

34. A supply of precious metals (as described in paragraphs 29 and 30 of this memorandum) made by the refiner thereof or by the person on whose behalf the precious metals were refined (generally the owner) is a zero-rated financial service under section 3 of Part IX of Schedule VI. Accordingly, the first sale of newly refined precious metal by the refiner or its owner is zero-rated. Subsequent supplies of the precious metal are exempt.

35. Where a refining or manufacturing fee is charged by a refiner of precious metals to the owner of the precious metals, the fee is generally subject to the GST/HST. However, where it is standard practice for a refiner to charge a separate premium fee when selling its own precious metal that is over and above the intrinsic precious metal value of the product, the fee is considered part of the selling price and subject to the GST/HST based on the tax status of the sale of the precious metal.

Non-precious metals

36. Carat gold, sterling silver, or platinum in jewellery or chattel form are examples of metals that do not meet the purity and form requirements and are not precious metals for GST/HST purposes. Supplies of these goods in Canada are generally taxable and subject to the GST/HST, unless otherwise zero-rated under Schedule VI or exempted under Schedule V.

Supplies to non-residents

37. Precious metals supplied by a financial institution to a non-resident person are zero-rated under section 1 of Part IX of Schedule VI.

Imports

38. Precious metals imported under any circumstances are prescribed by the Non-Taxable Imported Goods (GST) Regulations, and under section 8 of Schedule VII. They are not subject to the GST/HST when imported into Canada.

Options or contracts traded on recognized commodity exchanges

39. A commodity option or commodity future contract is a financial instrument for GST/HST purposes when traded on a recognized commodity exchange.

40. An option for the future supply of a commodity includes a right, but not an obligation, to buy or sell a commodity at a specified price within a stipulated future time period. The option buyer pays a premium to the dealer for this right, in addition to the usual commission. The supply of a commodity option when sold on a recognized commodity exchange is a financial service provided under paragraph (d) of the definition of financial service in subsection 123(1). However, the tax status of the underlying commodity, if the option is exercised, is either subject to the GST/HST or exempt depending on the nature of the supply.

41. A futures contract is an agreement to buy or sell a specific amount of a commodity at a particular price on a stipulated future date. Contrary to a commodity option, a futures contract obligates the buyer to purchase the underlying commodity and the seller to sell it, unless the contract is sold to another person before the exercise date. The supply of a futures contract when sold on a recognized commodity exchange is also a financial service provided under paragraph (d) of the definition of financial service in subsection 123(1). The tax status of the underlying commodity when the exercise date becomes due is either taxable or exempt depending on the nature of the supply.

Virtual payment instruments

42. Virtual payment instrument is defined in subsection 123(1) and "means property that is a digital representation of value, that functions as a medium of exchange and that only exists at a digital address of a publicly distributed ledger, other than property that

• (a) confers a right, whether immediate or future and whether absolute or contingent, to be exchanged or redeemed for money or specific property or services or to be converted into money or specific property or services,
• (b) is primarily for use within, or as part of, a gaming platform, an affinity or rewards program or a similar platform or program, or
• (c) is prescribed property".

43. Currently, there is no prescribed property for purposes of paragraph (c) of the definition of virtual payment instrument.

44. Some types of cryptoassets are not virtual payment instruments. For example, non-fungible tokens (NFTs) are not virtual payment instruments as NFTs do not function as a medium of exchange. Security tokens and utility tokens are other types of cryptoassets. These types of cryptoassets do not ordinarily meet the definition of a virtual payment instrument based on the exclusions in paragraphs (a) and (b) of that definition. A virtual payment instrument such as Bitcoin, Ether, and Litecoin is a cryptoasset. For more information on cryptoassets and related mining activities, refer to GST/HST Notice 324, Mining Activities in respect of Cryptoassets.

45. A virtual payment instrument was added to the definition of financial instrument in subsection 123(1), as paragraph (f.1), and is deemed to have come into force on May 18, 2019.

Prescribed instruments

46. Paragraph (g) of the definition of financial instrument provides for additional categories of financial instruments. Currently, there are no prescribed instruments for purposes of paragraph (g) of the definition of financial instrument.

Guarantees, acceptances, or indemnities

47. A guarantee includes an undertaking by a person to pay money or perform obligations with respect to a financial instrument provided under paragraphs (a), (b), (b.1), (d), (e), and (g) of the definition of financial instrument, should the person primarily liable for the payment of a debt or obligation fail to execute that person's responsibility. For example, a guarantee bond is considered to be a financial instrument. A guarantee bond is a guarantee wherein the principal and interest may be guaranteed by a party other than the issuer. This situation may arise in parent-subsidiary relationships where bonds issued by a subsidiary are guaranteed by the parent.

48. An acceptance in respect of paragraphs (a), (b), (b.1), (d), (e), and (g) of the definition of financial instrument includes a formal indication by a person of its acceptance or guarantee that a financial instrument will be paid (for example, Banker's Acceptance). An acceptance agreement is created, for example, when the drawee of a financial instrument writes accepted and a designated date of payment on the instrument and the drawee is responsible for payment at maturity.

49. An indemnity in respect of paragraphs (a), (b), (b.1), (d), (e), and (g) of the definition of financial instrument refers to a collateral contract or agreement by which one person agrees to indemnify another against an anticipated loss. It is an undertaking to be liable to pay money or perform an obligation in respect of the financial instrument (for example, indemnity bond).

50. Guarantees, acceptances, or indemnities pertaining to financial instruments described in paragraph (a), (b), (b.1), (d), (e), or (g) of the definition of financial instrument are also defined [in paragraph (h)] to be financial instruments for GST/HST purposes. Therefore, financial services relating to these guarantees, acceptances or indemnities are generally exempt.

Options and contracts

51. An option for the future supply of money or a financial instrument described in paragraphs (a) to (h) of the definition of financial instrument refers to a right, but not an obligation, to buy or sell money or a financial instrument at a specified price within a stipulated future time period.

52. A contract for the future supply of money or a financial instrument described in paragraphs (a) to (h) of the definition of financial instrument refers to an agreement to buy or sell the above at a stipulated future date. For example, a future contract to purchase or sell US dollars at a specified price on a stipulated future date is a financial instrument.

Further information