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17 December 2023- 11:24pm 2437299 Ontario – Tax Court of Canada finds that major renovations that did not largely “gut” the buildings were not “substantial renovations” Email this Content Russell J found that the appellant had not substantially renovated two Ontario properties, so that their sale was not made by it as a “builder” and were not subject to HST under ETA Sched. ... In applying this method, Russell J accepted that: “[F]looring” in the definition must mean “sub-flooring” as distinguished from whatever flooring was installed covering over the sub-flooring. … Putting down a new carpet, or new laminate wood flooring … [is not] sufficiently significant to contribute to whether a building might be said to have been “gutted.” ... The King, 2023 TCC 165 under ETA s. 123(1) – substantial renovation. ...

The corporation then sold this middle lot to an individual purchaser coupled with a covenant that it would demolish this structure – which, however, it did not do until 45 days after closing. ... This would be contrary to the “part thereof” language in section 123(1) …. ... Lucia Pessoa Park, 2018 ONSC 4218 under ETA s. 123(1) – residential complex, s. 194 and s. 224. ...

Richter – Quebec Court of Appeal finds that the court below could accord priority to interim bankruptcy-proposal financing over the ITA s. 227(4.1) trust for source deductions Email this Content At the conclusion of the sale process for the assets of two debtors who had filed a proposal under the Bankruptcy and Insolvency Act (“BIA”), the net sale proceeds were less than both the amount of interim financing from CIBC that the Quebec Superior Court had ordered to have a super-priority, and the total amount of unremitted federal and Quebec source deductions. ... Callidus indicated that the “proposal provisions in the BIA serve … the same remedial purpose as those in the CCCA – i.e., the financial rehabilitation of an insolvent corporate debtor” and “to the extent possible, the two statutes should be treated in a harmonized fashion.” Regarding the Attorney General’s argument- that BIA s. 50.6(3), which provided that the “court may order that the … charge rank in priority over the claim of any secured creditor,” did not apply because s. 227(4.1) did not create a security interest- “it would seem nonsensical in the overall scheme of the BIA that a court could order that the interim lending charge take priority over the claim of any hypothecary or mortgage creditor but not over the claim of an unsecured creditor benefiting from a sui generis non-proprietary right akin to a floating charge, that is, the ITA Deemed Trust. ...

14 December 2024- 10:58pm Martin – Tax Court of Canada finds that 100% of contributions made to the RCAs of US athletes were exclusions only from their Canadian-source income Email this Content The taxpayers (Russell Martin and Joshua Donaldson), who performed 40% of their duties in Canada rather than the US, agreed with the Toronto Blue Jays that a portion of their total package would take the form of annual contributions to a retirement compensation arrangement (RCA). ... However, Gagnon J agreed with the taxpayers that such an arrangement would not meet the requirements of an RCA and would instead likely constitute a salary deferral arrangement (SDA). – whereas here the taxpayers had substantiated the existence of an RCA by obtaining an actuarial report to support the amount of contributions necessary to provide them with a reasonable pension on retirement. ... The King, 2024 TCC 153 under s. 115(1)(a)(i), s. 248(1) – SDA, s. 5(1) and s. 207.5(1) – refundable tax. ...

2 October 2022- 10:46pm Frucor Suntory – New Zealand Supreme Court applies the NZ GAAR to treat interest coupons under a convertible loan and forward purchase arrangement as mostly principal Email this Content The New Zealand GAAR provided that a tax avoidance arrangement (defined to include an arrangement that has “tax avoidance as its purpose or effect … [or] as 1 of its purposes or effects … if the purpose or effect is not merely incidental”) was void as against the Commissioner. However, Ben Nevis had essentially found that where an arrangement “viewed in a commercially and economically realistic way” did not have the effect of using particular provisions of the NZ Act “in a manner … beyond parliamentary contemplation,” it generally would not be a tax avoidance arrangement. ... Ignoring interim financing steps, a NZ “Buyco” (DHNZ) in the Danone group financed about ¾ of its acquisition of a NZ target company with a $204 million interest-bearing advance from Deutsche Bank pursuant to a note that was convertible into non-voting shares of DHNZ. ...

HMRC took the startling position that the period of ownership began running from the time that the taxpayer entered into an agreement to purchase the apartment – and it was not even constructed until about three years later – but with the taxpayer occupying it as his main residence only from the time of the closing onwards until its sale at a gain. ... Newey LJ found that this deeming provision did not sufficiently inform what was meant by the “period of ownership,” and in rejecting HMRC’s position stated: HMRC's case … runs counter to the ordinary meaning of the words "period of ownership". ... Summary of Higgins v Revenue and Customs [2019] EWCA Civ 1860 under General Concepts – Ownership. ...

13 June 2022- 11:17pm CFI Funding Trust – Tax Court of Canada finds that GST/HST supporting documentation can be originated by the recipient and be in electronic form Email this Content A securitization trust (“CFI”) used a concurrent lease structure under which it became the concurrent (head) lessee of automobiles from automobile dealer and sublessor of the automobiles to the dealership customers, and financed the automobile dealers by prepaying rents under the head leases. Before finding that CFI had satisfied the documentary requirements for claiming ITCs for the HST on the rent prepayments, and in rejecting the Crown position that various CFI spreadsheets did not satisfy its alleged requirement that “a supporting document … must originate from or be signed by the [supplier]”, Hogan J stated: [T]he broad term “form” was used in subsection 169(4) of the Act and section 2 of the Regulations because Parliament was mindful of the benefits of paperless record keeping. … [I]nformation stored on a registrant’s computer server qualifies as supporting documentation. … [T]he Regulations do not set out a general requirement for the supporting documentation to be issued or signed by the supplier. ... The Queen, 2022 TCC 60 under Input Tax Credit Information (GST/HST) Regulations – supporting documentation. ...

At that time, the taxpayer was deemed by s. 256(9) to have no longer had legal control of the subsidiary from the beginning of that day – and the taxpayer also was dealing with the subsidiary at arm’s length as a factual matter at that time, given that a WTC nominee had taken charge as director and officer of the subsidiary two days’ previously, as requested by it for its commercial (albeit, ineffectual) purposes. ... In this regard, Owen J stated: [I]n my view the words “consideration given for the property”, when read in the context of the entire subsection, can only mean consideration given by the transferee for the property regardless of who receives that consideration. … Owen J then turned to the Crown’s GAAR position, which was that there was an abusive avoidance of s. 160, having regard to the proposition that s. 160 would have applied to the taxpayers if they had instead received the Property as a dividend on their shares. ... The Queen, 2021 TCC 24 under s. 160(1), Reg. 1102(1)(c), s. 245(1) – tax benefit, s. 245(3) and General Concepts – Onus. ...

Solo Capital – Court of Appeal of England and Wales finds that the revenue rule does not apply to fictitious tax refund claims made by a non-taxpayer Email this Content The Danish Customs and Tax Divisions (“SKAT”) brought claims in an English civil court seeking to recover £1.44 billion which it had paid based on allegedly fraudulent claims for refunds of Danish dividend withholding tax – SKAT alleged that most of the defendants had fraudulently misrepresented that they, as shareholders of Danish companies, had been subject to withholding at a rate in excess of the Treaty-reduced rate on dividends when, in fact, they never had held any shares in any of the relevant Danish companies. ... There was no tax due and those who committed the fraud were never taxpayers. … [W]hat SKAT is saying entitles it to repayment is not that the … alleged fraud defendants owe it tax or have cheated it out of tax, but that it was induced by fraudulent misrepresentation to pay away monies to these persons to which they were not entitled on any basis. ... Summary of Skatteforvaltningen v Solo Capital Partners LLP, [2022] EWCA Civ 234 under Statutory Interpretation – Revenue Rule. ...

16 August 2020- 11:41pm MMV Capital – Tax Court of Canada finds no GAAR abuse in acquiring an approximate 100% interest in a Lossco but with no change of de jure control Email this Content A venture capital corporation (MMV Finance) acquired 49% of the voting common shares of a corporation (MMV) in interim bankruptcy proceedings and subscribed $1,000 for a large number of non-voting common shares giving it over 99.9% of all the common share equity. ... Bocock J did not consider it to be a GAAR abuse for MMV to deduct its ample losses from the income generated by the loan portfolio, stating: Parliament … deliberately kept the reference to de jure control in 111(5) instead of adopting a de facto standard. … Evidence was not presented to show that the board did not have the actual authority to make material decisions on behalf of MMV. … The presence of the longstanding, bright-line test of de jure control bears … witness to the rejection of applying the GAAR in the circumstances of this appeal as regards subsection 111(5). ...