Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
Bank of Canada Clarifies RPAA Trust Tax Treatment for PSPs
RPAA | January 20, 2026
Image: Freepik
Finance Canada Fix Removes Unintended Tax Burden From RPAA Trust Rules
On September 8 2025, the Bank of Canada published a letter to PSPs on a trust tax issue, that said safeguarding end-user funds in “trust” accounts, a requirement under the Retail Payment Activities Act (RPAA), could create unintended tax obligations under the Income Tax Act. The impact threatened to burden PSPs with additional tax filings and compliance complexity for simply holding user funds.
For fintech founders, investors and advisors building or backing PSPs, safeguarding end-user funds is a core requirement of the RPAA. If standard trust arrangements triggered full trust tax treatment, PSPs could end up doing extra tax filings simply to meet payments rules. That would force teams to spend time and money on tax compliance instead of building products, serving customers, or growing the business.
See: Stablecoin Interest and Rewards A Regulatory Fault Line
On December 23 2025, the Bank of Canada issued an update that confirmed the Department of Finance proposed changes to the Income Tax Act so that RPAA safeguarding trust arrangements would not be treated as formal trusts for tax purposes. Instead, qualifying arrangements would be treated as deemed loans from end users to PSPs, removing the risk that PSPs would face extra trust tax filings requirements.
The change is intended to apply retroactively to September 8 2025, subject to legislative approval.
The lesson here is that staying engaged with regulators, raising issues early, and participating in public comment or industry groups can help outcomes that materially affect operations and capital efficiency.
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