Methanex – Privy Council confirms that a Barbados IBC was a resident of Barbados for general treaty purposes

Methanex Trinidad paid U.S.$85.4 million in dividends to its Barbados parent (Methanex Barbados), which promptly paid dividends to its Cayman parent which, in turn, promptly paid dividends to the ultimate Canadian parent (Methanex Canada).

After rejecting the submission of the Board of Inland Revenue (the “Board”) that the avoidance of Trinidad withholding tax on the dividend from Methanex Trinidad to Methanex Barbados, which benefited from the treaty between the two countries, resulted in an “artificial or fictitious” reduction in Trinidad (withholding) tax pursuant to s. 67(1) of the Income Tax Act (Trinidad), Lord Richards then turned to treaty-interpretation issues.

After reviewing Crown Forest, he found that Methanex Barbados was a resident of Barbados for purposes of the treaty, stating that in this regard, although Methanex Barbados had been incorporated under the International Business Companies Act (Barbados), so that it was subject to a very low rate of tax on its income, it nonetheless was subject to tax in Barbados on its worldwide income.

Regarding the Board's submission that the dividends should not be regarded as having been paid to a resident of Barbados for treaty purposes, Lord Richards distinguished Aiken Industries on the basis that there, the taxpayer was contractually obliged to pay interest payments it received to its creditor without any profit on the transaction, whereas here, "not only did Methanex Barbados make a profit as a result of the payment of the Dividends to it, but the profit thereby accruing to it was essential to the legality of the dividends which it then paid to Methanex Cayman."

Neal Armstrong. Summary of Methanex Trinidad (Titan) Unlimited v The Board of Inland Revenue (Trinidad and Tobago) [2025] UKPC 20 under Treaties – Income Tax Conventions – Art. 10.