Tag: GAAR

General Anti-Avoidance Rule: A GAAR is a statutory rule that deny taxpayers the benefit of an arrangement that have been entered into for tax-avoidance-purposes

The EU Anti Tax Avoidance Package - Anti Tax Avoidance Directives (ATAD I & II) and Other Measures

The EU Anti Tax Avoidance Package – Anti Tax Avoidance Directives (ATAD I & II) and Other Measures

Anti Tax Avoidance measures are now beeing implemented across the EU with effect as of 1 January 2019. The EU Anti Tax Avoidance Package (ATAP) was issued by the European Commission in 2016 to counter tax avoidance behavior of MNEs in the EU and to align tax payments with value creation. The package includes the Anti-Tax Avoidance Directive, an amending Directive as regards hybrid mismatches with third countries, and four Other measures. ATAD I The Anti-Tax Avoidance Directive (ATAD), COUNCIL DIRECTIVE (EU) 2016/1164 of 12 July 2016, introduces five anti-abuse measures, against tax avoidance practices that directly affect the functioning of the internal market. 1) Interest Limitation Rule  – Reduce profitshifting via exessive interest payments (Article 4) 2) Exit Taxation – Prevent tax motivated movement of valuable business assets (eg. intangibles) across borders (Article 5) 3) General Anti-Avoidance Rule (GAAR) – Discourage Artificial Arrangements (Article 6) 4) Controlled Foreign Company (CFC) – Reduce profits shifting to low tax jurisdictions (Article 7, 8) 5) Hybrid Mismatch Rule – ... Continue to full case
Canada vs ALTA Energy Luxemburg, September 2018, Case no 2014-4359(IT)G

Canada vs ALTA Energy Luxemburg, September 2018, Case no 2014-4359(IT)G

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 hydrocarbons from an area of the Duvernay formation designated under licenses granted by the government of Alberta. The Canadian tax authorities denied that the exemption applied and assessed ALTA Energy accordingly. Article 13(5) of the Canada-Luxembourg Tax Treaty is a distributive rule of last application. It applies only in the case where the capital gain is not otherwise taxable under paragraphs (1) to (4) of Article 13 of the Treaty. Article 13(4) is relevant to the outcome of this appeal. Under that provision, Canada has ... Continue to full case
Canada vs Loblaw Companies Ltd., September 2018, Canadian tax court, Case No 2015-2998(IT)G

Canada vs Loblaw Companies Ltd., September 2018, Canadian tax court, Case No 2015-2998(IT)G

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, among other things, it largely invested the grocery giant’s own funds and was “playing with its own money.“ Tax Court found the transactions entered into by Loblaw regarding Glenhuron did result in a tax benefit but “were entered primarily for purposes other than to obtain the tax benefit and consequently were not avoidance transactions.” The Tax Court concludes as follows: “I do not see any extending the scope of paragraph 95(2)(l) of the Act. No, had there been any avoidance transactions the Appellant would not ... Continue to full case
Canada vs Loblaw Financial Holdings Inc., September 2018, Tax Court of Canada, Case No 2018 TCC 182

Canada vs Loblaw Financial Holdings Inc., September 2018, Tax Court of Canada, Case No 2018 TCC 182

In this case the Tax Court found that Canadian grocery chain Loblaw using an offshore banking affiliate in a low tax jurisdiction – Barbados – to manage groups investments did not constituted tax avoidance. However, the 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. It has later been stated that Loblaw will appeal the decision of the Tax Court. Canada-vs-Loblaw-2018-TCC-182 ... Continue to full case
Zimbabwe vs CRS (Pvt) Ltd, October 2017, High Court, HH 728-17 FA 20/2014

Zimbabwe vs CRS (Pvt) Ltd, October 2017, High Court, HH 728-17 FA 20/2014

The issue in this case was whether tax administration could tax a “non-existent income” through the “deeming provisions” of s 98 of Zimbabwe’s Income Tax Act. A lease agreement and a separate logistical agreement had been entered by CRS Ltd and a related South African company, for the lease of its mechanical trucks, trailers and tankers for a fixed rental. The tax payer contended that the rentals in the agreements were fair and reasonable. The tax administration contended that they were outrageously low so as to constitute under invoicing and tax avoidance. The court ruled in favor of the tax administration. Excerps from the Judgement: “Where any transaction, operation or scheme (including a transaction, operation or scheme involving the alienation of property) has been entered into or carried out, which has the effect of avoiding or postponing liability for any tax or of reducing the amount of such liability, and which in the opinion of the Commissioner, having regard to the circumstances ... Continue to full case
New Zealand vs Honk Land Trustee Limited, 10 March 2017, Court of Appeal

New Zealand vs Honk Land Trustee Limited, 10 March 2017, Court of Appeal

The Court of Appeal upheld decisions of the High Court confirming the Commissioner of Inland Revenue’s disallowance of a $1,116,000 management fee for income tax purposes. The Court of Appeal dismissed Honk Land Trustees Limited’s (“HLT”) appeal on the following alternative grounds: (1) there was no satisfactory evidence to show that management services were in fact provided; (2) there was no sufficient nexus shown; and (3) in the event the management fees were deductible, they were nevertheless part of a void tax avoidance arrangement. Additionally, the Court of Appeal agreed that the Commissioner was entitled to impose abusive tax position shortfall penalties. NewZealand vs Honk-Land-Trustees-Limited-v-Commissioner-of-Inland-Revenue ... Continue to full case
France vs SARL Garnier Choiseul Holding, 17 July 2013, CE No 352989

France vs SARL Garnier Choiseul Holding, 17 July 2013, CE No 352989

This case is about the importance of proving that the transaction has a real economic purpose, and that it does not artificially seek to achieve tax benefits. The courts also consider the spirit of the law, for example, the purpose of the tax exemptions relating to parent-subsidiary distributions is to involve the parent company in the business of the subsidiary. Click here for translation France vs SARL Garnier Choiseul Holding Conseil_d_État_9ème___10ème_SSR_17_07_2013_352989 ... Continue to full case