Canada Supreme Court Clarifies GAAR Application to Benefits Under DTA With Luxembourg

The Canadian Supreme Court Nov. 26 issued Case No. 39113, clarifying the application of the general anti-abuse rule (GAAR) under the 1999 DTA with Luxembourg. An American oil and gas company created a Luxembourgish subsidiary company, which had its own subsidiary in Canada. The Luxembourgish subsidiary paid taxes in Luxembourg on the sale of its shares in the Canadian subsidiary, and claimed a tax exemption under the DTA. The Canadian Minister of National Revenue denied the exemption, asserting that the shares didn’t qualify as treaty-protected property, and if they did, the company engaged in an abusive tax avoidance. Upon appeal, ...