Treaties

Table of Contents

Cases

Canada v. Alta Energy Luxembourg S.A.R.L., 2021 SCC 49

additional consideration in Treaty context of giving effect to the contractual bargain

Before considering whether the taxpayer’s use of a capital gains exemption provision in the Canada-Luxembourg Treaty was an abuse under s. 245(4) given that the taxpayer was a conduit corporation rather than a corporation that had a significant economic connection to Luxembourg, Côté J stated (at paras. 29, 35-6):

Like all statutes, tax legislation must be interpreted by conducting a “textual, contextual and purposive analysis to find a meaning that is harmonious with the Act as a whole” … . However, where tax provisions are drafted with “particularity and detail”, a largely textual interpretation is appropriate in light of the well-accepted Duke of Westminster principle that “taxpayers are entitled to arrange their affairs to minimize the amount of tax payable” … .

… The objective of tax treaties, broadly stated, is to govern the interactions between national tax laws in order to facilitate cross-border trade and investment. One of the most important operational goals is the elimination of double taxation, where the same source of income is taxed by two or more states without any relief. …

Another important consideration is the dual nature — contractual and statutory — of tax treaties. Consideration of the contractual element is crucial to the application of the GAAR because it focuses the analysis on whether the particular tax planning strategy is consistent with the compromises reached by the contracting states.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) Treaty shopping to avoid capital gains tax on Canadian resource assets was contemplated, and not a Treaty abuse 660
Tax Topics - Treaties - Income Tax Conventions - Article 13 utilization of the business property exemption by a Luxembourg conduit accorded with the bargain negotiated by Canada, which was to encourage investment by such investors 605
Tax Topics - Treaties - Income Tax Conventions - Article 4 a company resident under Luxembourg domestic law (its legal seat was there) and that was “liable to be liable to tax,” was resident there for Treaty purposes even though a conduit 366
Tax Topics - Treaties - Income Tax Conventions subsequent OECD Treaty commentary not followed 198

Crown Forest Industries Ltd. v. The Queen, 92 DTC 6305, [1992] 2 CTC 1 (FCTD)

"... It seems to be not particularly logical or useful to impart a meaning to the expressions articulated in one treaty between Canada and one treaty partner from the meaning of the expressions articulated in another treaty with another partner whose legal, economic and political exigencies, not to emphasize its distinct treaty-negotiating personnel and techniques, may be quite distinct from the first" (p. 6309)

Utah Mines Ltd. v. The Queen, 92 DTC 6194, [1992] 1 CTC 306 (FCA)

Hugessen J.A. referred to the presidential message to the U.S. Senate seeking that body's ratification of an amendment to the 1942 U.S.-Canada Income Tax Convention in determining the purpose of that amendment.

National Corn Growers Assn. v. Canada (Import tribunal), [1990] 2 S.C.R. 1324

In interpreting s. 42 of the Special Import Measures Act (Canada), it was proper for the Canadian Import Tribunal to consult the terms of the GATT Subsidies Code. Gonthier J. stated (p. 1371):

"It is reasonable to make reference to an international agreement at the very outset of the enquiry to determine if there is any ambiguity, even latent, in the domestic legislation. The Court of Appeal's suggestion that recourse to an international treaty is only available where the provision of the domestic legislation is ambiguous on its face is to be rejected."

See Also

Trieste v. The Queen, 2012 DTC 1125 [at 3133], 2012 TCC 91, aff'd 2012 FCA 320

Lamarre J. examined the French version of the Canada-U.S. Convention in order to shed light on the meaning of the phrase "habitual abode" in Art. IV(2)(b). She stated (at paras. 25-26):

Where there are two official versions of a treaty in two languages, the Vienna Convention on the Law of Treaties (Can. T.S. 1980 No. 37), Art. 33(4), allows a comparison of the texts in order to adopt "...the meaning which best reconciles the texts having regard to the object and purpose of the treaty..." ...

The French version when translated literally means "where one stays in an habitual way". This version largely removes any ambiguity that may have been present in the English version.

Sommerer v. The Queen, 2011 DTC 1162 [at 845], 2011 TCC 212, aff'd 2012 FCA 207

Miller J. stated (at para. 119) that the official Commentaries for the OECD Model Tax Treaty are generally not applicable to treaties formed before the Commentary in question. A later Commentary is only of interpretive assistance to the extent that it is not in conflict with the commentaries that were applicable when the treaty was made.

Hinkley v. MNR, 91 DTC 1336, [1991] 2 CTC 2778 (TCC)

Assistance was derived in interpreting the Canada-U.K. Income Tax Convention from the OECD Commentary.

Locations of other summaries Wordcount
Tax Topics - Treaties - Income Tax Conventions - Article 14 80

Articles

Michael N. Kandev, Matthew Peters, "Treaty Interpretation: The Concept of 'Beneficial Owner' in the Canadian Tax Treaty Theory and Practice", Canadian Tax Foundation, 2011 Conference Report, 26:1-60

In the course of reviewing the meaning of "beneficial owner" under the OECD model convention, Kandev and Peters stated (at p. 28):

The jurisprudential trend in Canada, at least in theory, has been to allow increasing reliance on later commentaries, However, the practical effect of such commentaries remains uncertain. What seems clear is that taxpayers, their advisers, the tax administration, and tax judges will not avert their eyes from OECD materials merely on the theoretical basis that they were issued subsequent to the negotiation of a particular treaty. To the contrary, whatever the relevance and weight to be given to OECD commentaries, they are an important point of reference for treaty interpretations.

Locations of other summaries Wordcount
Tax Topics - Treaties - Income Tax Conventions - Article 11 392

Craig Elliffe, "Cross Border Tax Avoidance: Applying the 2003 OECD Commentary to Pre-2003 Treaties", British Tax Review, No. 3, 2012, p. 307

Later OECD commentaries can be of assistance in the interpretation of a treaty if they clarify or amplify the previous commentary. Changes to the commentary in 2003 were clarifying rather than fundamental, suggesting that these changes can be applied to treaties entered into before 2003.

David A. Ward, "Principles to be Applied in Interpreting Tax Treaties", 1977 Canadian Tax Journal, p. 263.

Locations of other summaries Wordcount
Tax Topics - Treaties - Income Tax Conventions 0