Background
BCo is a Schedule II Canadian chartered bank, B Sub is a BCo Canadian subsidiary which is registered in all provinces as a mutual fund dealer and investment fund manager, and the Trustee is a BCo Canadian subsidiary which will serve as the trustee of FHSAs (the “BCo FHSAs”), which may hold mutual funds of which B Sub is the manager and deposits with BCo.
Proposed transactions
As a promotional incentive to induce individuals to open a BCo FHSA and to assist them in saving for a first home, BCo and B Sub propose to make available, as investments for BCo FHSAs, deposits with BCo that are entitled to a high rate of interest (“High Interest Rate”). The deposits will be subject to standard terms and the rate subject to change without notice. The High Interest Rate will be available only on deposits held in a BCo FHSA (and not for other accounts), and will not take into account other investments that a holder of a BCo FHSA may have with BCo, B Sub or their affiliates.
Ruling
CRA ruled that the High Interest Rate paid on such a deposit will not constitute an advantage as defined in s. 207.01(1) in relation to the BCo FHSA. Its summary stated that the exception in (a)(v) of that definition will be met.