This appeal and cross-appeal arise as a result of the response provided by the Tax Court of Canada to a question submitted under Rule 58 of the Tax Court of Canada Rules (General Procedure), SOR/90-688a. The question was: Where the Minister of National Revenue has exercised her discretion pursuant to subsection 247(10) of the Income Tax Act (“ITAâ€) to deny a taxpayer’s request for a downward transfer pricing adjustment, is that a decision falling outside […]
In 1992, Loblaw Financial Holdings Inc. (“Loblaw Financialâ€), a Canadian corporation, incorporated a subsidiary in Barbados. The Central Bank of Barbados issued a licence for the subsidiary to operate as an offshore bank named Glenhuron Bank Ltd. (“Glenhuronâ€). Between 1992 and 2000, important capital investments in Glenhuron were made by Loblaw Financial and affiliated companies (“Loblaw Groupâ€). In 2013, Glenhuron was dissolved, and its assets were liquidated. For the 2001, 2002, 2003, 2004, 2005, 2008 […]
ALTA Energy, a resident of Luxembourg, claimed an exemption from Canadian income tax under Article 13(5) of the Canada-Luxembourg Income Tax Treaty in respect of a large capital gain arising from the sale of shares of ALTA Canada, its wholly-owned Canadian subsidiary. At that time, Alta Canada carried on an unconventional shale oil business in the Duvernay shale oil formation situated in Northern Alberta. Alta Canada was granted the right to explore, drill and extract […]
In 2013 and 2014, the Canadian tax authorities conducted the Transfer Pricing Audit of Bank of Nova Scotia. Prior to issuing tax assessment letters for FY 2007, 2008, 2009 and 2010, the Bank entered into a settlement agreement with the Minister of National Revenue in respect of the Transfer Pricing Audit. The settlement agreement provided for the Minister to reassess the Bank to include certain amounts in its income as transfer pricing adjustments in its […]
An employee (tax manager) of Amdocs Inc did not cooperate with the Canada Revenue Agency during several audits of the company and did not inform his superior about the audits. The audits resulted in tax reassessments for FY 2012 – 2014. The reassessment concerning FY 2012 resulted in income tax payable by $3,353,906, but by the time the employee informed his superior of the reassessment in 2019, Amdocs was time barred from objecting by virtue […]
Cameco, together with its subsidiaries, is a large uranium producer and supplier of the services that convert one form of uranium into another form. Cameco had uranium mines in Saskatchewan and uranium refining and processing (conversion) facilities in Ontario. Cameco also had subsidiaries in the United States that owned uranium mines in the United States. The Canadian Revenue Agency found that transactions between Cameco Corp and the Swiss subsidiary constituted a sham arrangement resulting in […]
This decision is about the jurisdiction of the Tax Court of Canada, or perhaps more accurately about the scope of an appeal of an assessment. It arises in the context of an appeal by Dow Chemical Canada ULC of a reassessment of its 2006 taxation year. The reassessment increased Dow Chemical’s income under the transfer pricing provisions in section 247 of the Income Tax Act. In reassessing Dow Chemical for its 2006 and 2007 taxation […]
AgraCity Canada had entered into a Services Agreement with a group company, NewAgco Barbados, in connection with the sale by NewAgco Barbados directly to Canadian farmer-users of a glyphosate-based herbicide (“ClearOutâ€) a generic version of Bayer-Monsanto’s RoundUp. In reassessing the taxable income of AgraCity for 2007 and 2008 the Canada Revenue Agency relied upon the transfer pricing rules in paragraphs 247(2)(a) and (c) of the Income Tax Act (the “Actâ€) and re-allocated an amount equal […]
Bayer Inc, is a Canadian subsidiary of Bayer AG Germany. Bayer is a multinational group of companies in the pharmaceutical and life sciences industry . Since 2016, the Canada Revenue Agency has been auditing Bayer Inc. 2013-2015 taxation years. Between December 2017 and August 2018, the CRA made a series of requests to Bayer Canada for copies of agreements that had been negotiated at arm’s length with respect to the activities that are being examined […]
Cameco, together with its subsidiaries, is a large uranium producer and supplier of the services that convert one form of uranium into another form. Cameco had uranium mines in Saskatchewan and uranium refining and processing (conversion) facilities in Ontario. Cameco also had subsidiaries in the United States that owned uranium mines in the United States. In 1993, the United States and Russian governments executed an agreement that provided the means by which Russia could sell […]
In the case of Canadian grocery chain Loblaw, the Canadian Tax Court in 2018 found that using an offshore banking affiliate in a low tax jurisdiction – Barbados – to manage the groups investments did not constitute tax avoidance. However, the Tax Court’s interpretation of a technical provision in the Canadian legislation had the consequence that Loblaw would nonetheless have to pay $368 million in taxes and penalties. This decision was later overturned by the […]
In the course of an ongoing Canadian triel concerning transfer pricing adjustments in the amounts of $3,000,000,000, the Canadian Imperical Bank of Commerce had brought a motion for leave to call in seven expert witnesses – included four transfer pricing experts. The motion was dismissed by the Court. The Federal Court Rules impose a high threshold on parties seeking to call additional expert witnesses. The fact that the appeals involved lots of money did not […]
Wheaton Precious Metals Corp. has reached a settlement with the Canada Revenue Agency which provides for a final resolution of Wheaton’s tax appeal in connection with the reassessment under transfer pricing rules of the 2005 to 2010 taxation years related to income generated by the Company’s wholly-owned foreign subsidiaries, Wheaton International, outside of Canada. Wheaton is the leading company in the precious metals streaming business, essentially providing up-front financing to mining companies looking to build […]
Canadian mining company, Cameco Corp., sells uranium to a wholly owned trading hub, Cameco Europe Ltd., registred in low tax jurisdiction, Switzerland, which then re-sells the uranium to independent buyers. The parties had entered into a series of controlled transactions related to this activity and as a result the Swiss trading hub, Cameco Europe Ltd., was highly profitable. Following an audit, the Canadian tax authorities issued a transfer pricing tax assessment covering years 2003, 2005, 2006, […]
ALTA Energy, a resident of Luxembourg, claimed an exemption from Canadian income tax under Article 13(5) of the Canada-Luxembourg Income Tax Treaty in respect of a large capital gain arising from the sale of shares of ALTA Canada, its wholly-owned Canadian subsidiary. At that time, Alta Canada carried on an unconventional shale oil business in the Duvernay shale oil formation situated in Northern Alberta. Alta Canada was granted the right to explore, drill and extract […]
The Court found that section 245 (GAAR) of the Canadian Income Tax Act did not apply to the transactions in question. Subsection 245(1) defines a “tax benefit†as a reduction, avoidance or deferral of tax. The Respondent says that the tax benefit BMO received was the reduction in its tax payable as a result of subsection 112(3.1) not applying to reduce its share of the capital loss on the disposition of the common shares of […]
The Canada Revenue Agency had issued a reassessments related to Loblaw’s Barbadian banking subsidiary, Glenhuron, for tax years 2001 – 2010. The tax authorities had determined that Glenhuron did not meet the requirements to be considered a foreign bank under Canadian law, and therefore was not exempt from paying Canadian taxes. “Loblaw took steps to make Glenhuron look like a bank in order to avoid paying tax. Government lawyers said Glenhuron did not qualify because, […]
Several mining companies are beeing audited by the Canadian Revenue Agency for aggressive tax planning and tax evasion schemes. Among the high-profile companies that have filed pleadings with the Canadian Tax Court are Cameco, Silver Wheaton, Burlington Resources, Conoco Funding Company and Suncor Energy. The CRA says, the companies inappropriately ran international transactions through subsidiary companies in low-tax foreign jurisdictions. In the Cameco case the Revenue Agency has audited years 2003 to 2015 and challenged […]
Mutual-fund seller AGF Management Ltd. has settled a federal tax case over income shifted from Canada to an overseas subsidiary. The company has recently disclosed that the Canada Revenue Agency sought a total of $71.9-million in back taxes, interest and penalties related to the period spanning 2005-10. An agreement has since been reached, but the terms were not disclosed. In its latest quarterly report, AGF said the disagreement over taxes owed relates to transfer pricing […]
In the case of Univar Holdco the Canadian tax authorities had applied Canadian Anti-Avoidance Rules to a serie of transactions undertaken by the Univar Group following the acquisition of the group’s Dutch parent. The (only) purpose of these transactions was to increase the amount of retained earnings that could be taken out of Canada without incurring withholding tax. The Federal Court of Appeal overturned the prior decision of the Tax Court and came to the […]
In relation to ongoing audits regarding transfer payments, the tax authorities asked the Court to order approximately 25 personnel from Cameco Corporation and its wholly owned subsidiaries to be made available for interview regarding Cameco’s 2010, 2011, and 2012 income tax years. It was confirmed in Court that Cameco has complied with all audit requests related to the relevant years except the refused request for oral interviews. Cameco has agreed to written questioning by the […]
This case i about the legal requirement to submit evidence. The revenue service argues that the disputed questions are relevant to the matters in issue and that Burlington Resources Finance Company has either improperly refused to answer, or not fully answered, the questions. Burlington Resources Finance Company argues that all proper questions have been fully answered and that answers to improper questions have been correctly refused. The underlying tax assessment relates to disallowence of tax […]
There are situations where transactional profit methods are found to be more appropriate than traditional transaction methods. For example, cases where each of the parties makes unique and valuable contributions in relation to the controlled transaction, or where the parties engage in highly integrated activities, may make a transactional profit split more appropriate than a one-sided method. As another example, where there is no or limited publicly available reliable gross margin information on third parties, […]
The issue before the court was whether the Canadian revenue service had the ability to issue the second reassessments given the Canadian and US competent authorities subsequently agreed on a MAP settlement. The Tax Court found that a settlement agreed to via the competent authority precluded a subsequent tax-reassessment that attempted to further increase the taxpayer’s income.
Developments in Canada In January 2016, the Federal Court of Appeal affirmed the decision of the Tax Court of Canada in Marzen Artistic Aluminum Ltd. v. The Queen, 2016 FCA 34, upholding most of the CRA’s transfer pricing adjustments and the imposition of transfer pricing penalties. The case, however, provided little insight into the meaning of “reasonable efforts†in the context of transfer pricing documentation, given that the taxpayer did not prepare contemporaneous documentation. The […]
The intercompany transactions at issue involved fees paid to the company’s wholly-owned Barbados based subsidiary during taxation years 2000 and 2001 for sales, marketing and support services. The Tax Court of Canada had determined that it was appropriate to apply the CUP method rather than the TNMM, which was advocated by the company’s expert. Canada’s Federal Court of Appeal upheld the decision by the Tax Court of Canada, which in 2014 ruled that the Canada Revenue Agency […]
In this case the Federal Court of Appeal upheld the decision of the Canadian International Trade Tribunal in which the tribunal upheld seven decisions – one for each of the years 2005 through 2011 – of the Canada Border Services Agency under subsection 60(4) of Canada’s Customs Act. Skechers Canada, a subsidiary of Skechers USA, purchases footwear to sell in Canada from its parent at a price equal to the price paid by Skechers US to its manufacturers, the […]
TeleTech Canada Inc. is seeking judicial review of what it says is the continuing refusal of the Canada Revenue Agency to provide it with relief from double taxation, allegedly in breach of the CRA’s obligations under articles IX and XXVI of the Convention between Canada and the United States of America with respect to Taxes on Income and on Capital, 26 September 1980, Can. T.S. 1984 No. 15, as implemented by the Canada-United States Tax […]
The Canadian Supreme Court ruled in the case of GlaxoSmithKline Inc. regarding the intercompany prices established in purchases of ranitidine, the active ingredient used in the anti-ulcer drug Zantac, from a related party during years 1990 through 1993. The Supreme Court partially reversed an earlier determination by the Tax Court, upholding a determination by the Federal Court of Appeals in its conclusion that if other transactions are relevant in determining whether transfer prices are reasonable, […]
McKesson is a multinational group involved in wholesale distribution of pharmaceuticals. Its Canadian subsidiary entered into a receivables sales (factoring) agreement with its direct parent, McKesson International Holdings III Sarl in Luxembourg in 2002. Under the agreement, McKesson International Holdings III Sarl agreed to purchase the receivables for about C$460 million and committed to purchasing all the eligible receivables as they arose for the next five years. The price of the receivables was determined at a discount […]
The Dutch company, Velcro Holdings BV (“VHBVâ€), licensed IP from an affiliated company in the Dutch Antilles, Velcro Industries BV (“VIBVâ€), and sublicensed this IP to a Canadian company, Velcro Canada Inc. (VCI). VHBV was obliged to pay 90% of the royalties received from VCI. within 30 days after receipt to VIBV. At issue was whether VHBV qualified as Beneficial Owner of the royalty payments from VCI and consequently would be entitled to a reduced […]
Alberta Printed Circuits Ltd (APC, the taxpayer) was a Canadian manufacturer of custom prototype circuit boards. The manufacturing process was initially manual and later automated. In 1996, a Barbados company, APCI Inc., was formed via a complex ownership structure. The Barbados company provided services to Alberta Printed Circuits Ltd. by performing setup functions, software and website development, and maintenance services. APCI charged the appellant a fixed fee for the setup services and a square-inch fee for non-setup […]
According to a U.S. regulatory filing, Daimler AG has paid the federal, Ontario and Alberta governments more than $700 million after accepting a settlement in June, 2010. Daimler further expects to pay the remainder of a $1.5-billion extra tax bill this year to settle a long-standing dispute over how its former partner, Chrysler, accounted for auto and parts shipments across the Canada-U.S. border. The tax case is about transfer pricing, or how Chrysler accounted for […]
In the case of General Electric Capital, Canada, the issue was if a 1% guarantee fee paid by General Electric Capital Canada Inc. to its AAA-rated US parent company satisfied the arm’s length test. The Canadian tax administration argued that implicit support resulted in General Electric Canada having a AAA credit rating, so that the guarantee provided by the US parent had no value. Taxpayer argued that the 1% guarantee fee did not exceed arm’s length pricing and that implicit support from […]
The Knights of Columbus, a resident United States corporation, provides life insurance to its Canadian members and relies upon Canadian agents to do so. The issue before the court was whether the Knights of Columbus is liable for tax in Canada on business profits from its insurance business. This hinges on the application of the Convention between the United States of America and Canada with respect to Taxes on Income and Capital (the Canada-U.S. Treaty), […]
Prévost is a resident Canadian corporation who declared and paid dividends to its shareholder Prévost Holding B.V. (“PHB.V.”), a corporation resident in the Netherlands. When Prévost paid the dividends it withheld five percent in tax. The tax authorities issued an assessments against Prévost in respect of the aforementioned dividends. The tax authorities assessed on the basis that the beneficial owners of the dividends were the corporate shareholders of PHB.V., a resident of the United Kingdom […]
The issue is whether MIL (INVESTMENTS) S.A. was exempt from Canadian income tax in respect of the capital gain of $425,853,942 arising in FY 1997 on the sale of shares of Diamond Field Resources Inc. by virtue of the Canadian Income Tax Act and the Convention Between Canada and The Grand Duchy of Luxembourg for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital […]
The Tax Court of Canada upheld the right of Avotus Corporation to deduct from its Canadian income losses incurred by its subsidiary in Puerto Rico. The Tax Court found that the Puerto Rican subsidiary was Avotus’s agent under a validly executed agency agreement, rejecting the CRA’s claim that the written agreement was unacceptable because the subsidiary’s conduct was inconsistent with that of an agent.
The issue is whether MIL (INVESTMENTS) S.A. was exempt from Canadian income tax in respect of the capital gain of $425,853,942 arising in its 1997 taxation year on the sale of shares of Diamond Field Resources Inc. by virtue of the Canadian Income Tax Act and the Convention Between Canada and The Grand Duchy of Luxembourg for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and […]
The CRA had issued a six assessments for fiscal years 1995-1999 based on the principle purpose of Univar’s acquisition of shares of Van Waters & Rogers (Barbadosco) Ltd. being to permit Univar to avoid, reduce or defer the payment of tax that would otherwise be payable under the Act within the meaning of paragraph 95(6), and thus deemed not to have been acquired . “ITA 95(6) Where rights or shares issued, acquired or disposed of […]
Miron and Frères Ltd acquired a farm from one of its shareholders, Gérard Miron, at a price ($600.000) far exceeding the original cost ($90.000) one year prior to the transaction. Miron and Frères Ltd claimed a capital cost allowance based on the price paid. Considering that the purchase was not a transaction “at arm’s length†but was one between a corporation and a controlling shareholder, the tax authorities rejected the claim and based the allowance […]
