‍An overview of the legislative framework governing the GST/HST treatment of Canadian cryptoasset mining participants, the differential outcomes arising under current interpretive guidance, and potential avenues for legislative and administrative review.

Executive Summary

Section 188.2 of the Excise Tax Act (effective February 5, 2022) deems cryptoasset mining outside commercial activity for GST/HST purposes. Operators neither collect GST/HST on mining revenue nor claim input tax credits (ITCs) on inputs such as electricity, hardware, and hosting.

CRA Notice 324 ties treatment to risk-sharing:

• PPLNS miners (paid from actual block rewards) fall under the default rule: no GST/HST on revenue and no ITCs.
• PPS/FPPS miners (fixed per-share payments) are treated as suppliers of computing services: GST/HST applies on revenue and ITCs are available.

Identical mining activity can therefore produce opposite tax outcomes based solely on pool payment structure. PPLNS operators face a permanent unrecoverable GST/HST cost (e.g., $50k–$150k yearly on $1M electricity spend, reflecting the full 5–15% GST/HST rate range).

This differential creates a structural disadvantage versus foreign competitors, distorts pool-selection decisions, and encourages compute-rental arrangements that favour larger, more centralized mining pools. Over time it risks discouraging investment in a sector where Canada holds clear advantages (≈9% of global Bitcoin hashrate, abundant hydro power, an available excess of natural gas, and regulatory stability).

We urge the Government of Canada to act on the recommendations in this briefing: either (A) amend the ETA to zero-rate PPLNS mining activities under Schedule VI (preserving no GST/HST on revenue while restoring ITC eligibility), or (B) adopt uniform GST/HST treatment across all pool payment structures, and issue clarifying CRA guidance in the interim.

Overview

Section 188.2 of the Excise Tax Act (ETA), introduced by the Department of Finance effective February 5, 2022, established a legislative framework governing the application of GST/HST to cryptoasset mining activities in Canada (Canada, Finance, News Release). The provision was designed to resolve longstanding interpretive uncertainty regarding the tax status of mining participants and their entitlement to input tax credits (ITCs) on mining-related expenditures.

As interpreted by the Canada Revenue Agency in GST/HST Notice 324 (Canada Revenue Agency, Notice 324), the provision produces materially different GST/HST outcomes for mining operators based on the payment methodology employed by their respective mining pools. Participants in Pay Per Last N Shares (PPLNS) pools and participants in Pay Per Share (PPS) and Full Pay Per Share (FPPS) pools are subject to different GST/HST treatments, notwithstanding that the underlying mining activities performed may be substantively similar.

This memorandum describes the applicable legislative framework, the differential treatment arising under the current interpretive approach, the financial and operational considerations for Canadian PPLNS mining operators, and the options available for seeking legislative or administrative review.

I. Background: Section 188.2 of the Excise Tax Act

Prior to February 5, 2022, no specific legislative provision addressed the application of GST/HST to cryptoasset mining. Participants were required to apply general GST/HST principles to activities that did not correspond neatly to conventional supply-and-recipient frameworks, resulting in uncertainty regarding registration obligations, ITC entitlements, and the characterization of mining payments.

Section 188.2 was introduced to provide clarity by establishing a default rule: mining activities are deemed to fall outside the scope of commercial activity for GST/HST purposes (Canada, ETA s. 188.2). The practical consequences of this deeming rule are as follows:

• Mining operators are not required to collect or remit GST/HST on mining revenue received.
• Mining operators are not entitled to claim ITCs in respect of property or services acquired or consumed in connection with mining activities, including electricity, hardware, and hosting infrastructure.

As noted in Finance Canada's explanatory notes accompanying the draft proposals, the rationale for this approach was to avoid the administrative complexity inherent in applying standard GST/HST supply analysis to transactions involving no identifiable recipient, no enforceable obligation to pay, and no conventional consideration (Canada, Finance, Explanatory Notes). The default rule was intended to provide certainty to industry participants by removing most mining activity from the GST/HST system entirely.

An exception to the default rule is provided in subsection 188.2(5), which restores the application of general GST/HST rules where a mining activity is performed by one identified person for another (Canada, ETA s. 188.2(5)). The scope of this exception, as interpreted by the CRA, is the source of the differential treatment described in this memorandum (PwC Canada; McCarthy Tetrault).

II. Differential GST/HST Treatment by Pool Payment Structure

A. The Operative Distinction

Section 188.2 does not apply uniformly to all mining participants. Its application depends on whether a miner qualifies as a member of a mining group, defined in subsection 188.2(1) as a group of persons that, under an agreement, pool property or services for mining activities and share mining payments among members.

In GST/HST Notice 324, the CRA clarified that the question of whether a miner shares in mining payments is determined by reference to whether the miner bears the risk of success of the mining endeavour (Canada Revenue Agency, Notice 324). This risk-sharing test produces the following outcomes depending on pool payment structure:

• PPLNS participants receive compensation derived from the pool's actual block rewards, distributed proportionally among contributing miners within a defined lookback window. As payment is tied to actual results, PPLNS miners are considered to share in the risk of the activity and are classified as mining group members. The default rules in subsections 188.2(2) through (4) apply: no GST/HST obligation on revenue and no ITC entitlement on inputs.
• PPS and FPPS participants receive a fixed payment per valid share submitted, calculated by reference to the expected statistical value of block rewards, without adjustment for actual results. As payment is not contingent on actual outcomes, these participants are not considered to share in the risk of the activity. They are treated as arms-length suppliers of computing services, the exception in subsection 188.2(5) applies, and general GST/HST rules govern: GST/HST is collectible on revenue (subject to registration thresholds), and ITCs on inputs are available.

‍Point of Distinction

‍Two operators performing identical mining work with identical inputs may be subject to different GST/HST treatments depending solely on whether their pool pays based on actual block results or on an estimated per-share rate. The underlying mining activity is the same in both cases.

B. Financial Considerations for PPLNS Operators

For PPLNS operators, the ITC denial arising under the default rule represents a recurring cost that does not arise for PPS and FPPS operators, nor for mining operators in most comparable international jurisdictions. GST/HST paid on electricity, hardware, and hosting infrastructure is not creditable, and no mechanism exists under the current framework to recover these amounts.

This cost scales with the size of the operation and recurs on each billing cycle. It is not a transitional or one-time adjustment but a permanent feature of participation in the PPLNS structure under the current legislative framework.

‍Illustrative Comparison

A Canadian PPLNS operator with annual electricity expenditure of $1,000,000 would absorb between approximately $50,000 and $150,000 in unrecoverable GST/HST annually, depending on the applicable provincial rate (5–15%). A PPS operator at equivalent scale would recover a corresponding amount through the ITC mechanism. This differential recurs and compounds with each year of operation.

C. GST/HST Considerations at the Pool Operator Level

A related consideration arises in the context of PPS and FPPS arrangements. Where a GST/HST-registered Canadian PPS or FPPS miner supplies computing services to a pool operator, it is required to collect GST/HST on that supply. However, subsection 188.2(2) operates to deny ITCs to the pool operator in respect of that GST/HST, as the computing resources are acquired for use in connection with the operator's own mining activities, which are deemed to fall outside the course of commercial activity.

Treatment at the Pool Operator Level

A registered Canadian PPS or FPPS miner charges GST/HST to the pool operator on its supply of computing services. The pool operator is not entitled to recover that amount through the ITC mechanism. The GST/HST cost is therefore embedded at the pool operator level with no available offset. No equivalent charge arises in a PPLNS arrangement.

The practical consequences of this treatment include the following considerations:

• Registered PPS and FPPS miners are required to charge GST/HST on supplies to pool operators, which pool operators cannot recover. This increases the effective cost of engaging Canadian miners relative to non-Canadian alternatives where no equivalent tax applies.
• Pool operators may, over time, reflect this unrecoverable cost in the terms offered to Canadian participants, including through adjustments to per-share rates or fee structures.
• Canadian PPS and FPPS mining arrangements may therefore carry a higher effective cost than comparable arrangements involving non-Canadian participants, which could affect the competitiveness of Canadian operators in negotiating pool terms.

Taken together, the current framework results in an unrecovered GST/HST cost at one or more points in the mining supply chain, regardless of whether the participant is in a PPLNS or a PPS/FPPS arrangement.

D. Broader Considerations for the Canadian Mining Industry

PPLNS is a widely adopted payment structure in the global mining industry, favoured for its alignment of miner and pool operator incentives and its collective distribution of mining risk. The application of the default rule to PPLNS participants raises considerations that extend beyond individual operators:

• International context. Canada holds approximately 9% of global Bitcoin hashrate, supported by abundant hydroelectric power, political stability, and a developed regulatory environment (Hashrate Index). The United States, which accounts for approximately 35% to 40% of global hashrate (UPay Blog), does not apply a consumption tax equivalent to mining inputs (Wimmer). Emerging mining jurisdictions such as Paraguay and Ethiopia offer lower electricity costs without a comparable input tax structure (FDE Hydro). The unrecoverable input cost borne by Canadian PPLNS operators represents a cost differential relative to competitors in these jurisdictions that does not arise from operational factors (Fraser Institute).
• Pool structure selection. The differential tax treatment of PPLNS and PPS/FPPS structures introduces a tax consideration into pool selection decisions that would not otherwise be relevant to a commercially driven analysis. A tax-neutral framework would allow operators to select pool structures based solely on operational and risk management factors.
• Supply chain considerations. The compressed operating margins attributable to irrecoverable input costs may affect the capacity of PPLNS operators to invest in equipment, expand energy consumption, and engage domestic suppliers of hardware and hosting infrastructure.
• Cumulative effect. The irrecoverable GST/HST cost recurs on every billing cycle. Over time, the cumulative amount represents a material cost that would, in a different tax environment, be available for reinvestment in operations and infrastructure.
  

III. The Economic Case for Legislative Review

Canada's Current Economic Context

Canada possesses a combination of natural and institutional advantages that position it as one of the world’s most competitive jurisdictions for cryptoasset mining. Canada holds approximately 9% of global Bitcoin hashrate and is recognized as the global leader in sustainable, hydropower-driven mining (Hashrate Index). The Canadian cryptocurrency mining hardware market generated USD $96.4 million in revenue in 2023 and is projected to reach USD $240.6 million by 2030, at a compound annual growth rate of 13.9% (Grand View Research). Abundant and affordable clean energy, political and regulatory stability, a skilled technical workforce, and a cold climate that reduces cooling costs together form a genuinely competitive foundation for a growing, export-oriented digital infrastructure industry.

The economic contribution extends beyond the operators themselves. Canadian mining operations bring capital investment to rural and remote communities, support grid stability through demand response programs, and facilitate the development of new renewable energy generation assets. Electricity utilities, equipment distributors, data centre operators, and local communities all participate in the economic activity that mining investment generates. These are characteristics of precisely the kind of productive, capital-intensive, technology-driven businesses that economic policy should be positioned to support.

Current Investment Climate

The question of whether to review the GST/HST treatment of cryptoasset mining arises against a backdrop of weaker business investment in Canada. Recent data indicate consecutive quarterly declines in business capital investment and real per-capita GDP that has lagged the average of high-income countries (Business Council of Canada; Mintz; CBC News; TD Economics; Deloitte Canada). In this environment, even modest, permanent cost differentials can influence capital-allocation decisions.

The Specific Cost of the Current Framework

The current GST/HST treatment of PPLNS mining participants imposes a permanent, irrecoverable input-tax cost that does not exist for international counterparts and does not arise from any operational distinction between PPLNS and PPS/FPPS mining.

Canada’s estimated global share of mining investment declined from 12% in 2015 to 7% in 2023 (Dentons Mining Law Blog). Multiple factors- including electricity pricing, permitting timelines, grid access, and capital-market conditions- influence location decisions. The GST/HST differential creates an additional and quantifiable disadvantage for Canadian PPLNS operators relative to jurisdictions without equivalent input taxes. At industrial scale the unrecoverable amount is material; over time it may affect both the pace of reinvestment in existing Canadian operations and the location choices of new projects.

The amendment sought in this memorandum is a targeted corrective measure. It does not require a wholesale restructuring of the GST/HST system. It requires Parliament to align the tax treatment of economically equivalent mining activities in a manner consistent with the neutrality principles that underlie the GST/HST framework, and in a manner that removes a specific and identifiable barrier to investment in an industry where Canada is demonstrably well-positioned to compete.

IV. Options for Legislative and Administrative Review

The differential treatment described in this memorandum is a function of the current legislative framework and the CRA's interpretive approach. The following options are available for seeking a modified outcome.

Option A: Legislative Amendment to Extend ITC Eligibility to PPLNS Operators

An amendment to the ETA could be structured to add PPLNS mining activities to Schedule VI, treating them as zero-rated supplies. This would preserve the outcome that no GST/HST is collectible on mining revenue while restoring ITC entitlement on direct inputs, as a supplier of zero-rated supplies remains engaged in commercial activity for GST/HST purposes notwithstanding the 0% rate.

Option B: Uniform Treatment Across All Pool Payment Structures

Alternatively, an amendment could be sought to remove the distinction between pool payment structures entirely. Under this approach, all pool-based mining participation, regardless of whether the relevant pool operates on a PPLNS, PPS, or FPPS basis, would be subject to a single uniform GST/HST treatment. This would remove the tax consideration from pool selection decisions and establish a consistent framework across the industry.

Administrative Relief

In parallel with any legislative engagement, the following administrative measures may be pursued through the CRA:

• A request for a supplementary publication to Notice 324 providing additional guidance on the classification of hybrid pool payment structures and the application of the risk-sharing test to non-standard arrangements.
• A private GST/HST ruling confirming the applicable treatment for a specific pool arrangement, which would provide binding certainty for the requesting party pending any legislative change.

Our Engagement Strategy

We are engaging with industry associations on a submission seeking legislative amendment. Reach out to us if your organization can provide a supporting use case or if would like to be part of the submission process: hello@getmetrics.ca 

Works Cited:

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Canada. Department of Finance. Explanatory Notes Relating to the Excise Tax Act: Legislative and Regulatory Proposals. Feb. 2022, fin.canada.ca/drleg-apl/2022/ita-lir-0222-n-eng.html. Accessed 1 July 2026.

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