Alta Energy may inform the Canadian interpretation of the MLI

In Alta Energy, Hogan J found that the reference in the preamble to the Canada-Luxembourg Treaty to the prevention or reduction of double taxation was too vague to be indicative of the rationale of the specific Treaty Articles relied upon by the taxpayer – and also found in a GAAR context that Treaty-shopping was not contrary to the object and spirit of the Treaty. This approach might inform a consideration of the minimum standards in the MLI that specifically condemn double non-taxation and treaty shopping and provide a principal purpose general anti-abuse test (“PPT”).

[I]n the absence of either a rule that changes the liable-to-tax test to a subject-to-tax test or a limitation-on-benefits clause, it could still be argued that the clear wording of a treaty would be too powerful an evidence of a treaty’s object and purpose to be overridden by a vague preamble or a subjective PPT.

Neal Armstrong. Summary of Michael N. Kandev, “Taxpayer Wins Treaty Shopping Challenge in Alta Energy Luxembourg,” Tax Management International Journal, 14 September 2018, p. 572 under Treaties – MLI – Art. 6.