Bloomberg BNA’s Premier International Tax Library is a comprehensive global tax resource. Trust Bloomberg BNA's Premier International Tax Library for the guidance you need on...
July 11 — The Tax Court of Canada upheld an appeal by a Canadian subsidiary of major U.S. investment firm CIT Group Inc. that more than C$220 million ($170 million) in income earned by its foreign affiliates shouldn't be taxed in Canada ( CIT Grp. Secs. (Can.) Inc. v. The Queen, Can. Tax Ct., No. 2012-950(IT)G, 7/4/16 ).
The court found that while nine Barbados subsidiaries of CIT Group Securities (Canada) Ltd. were controlled foreign affiliates as defined in Section 95 of Canada's Income Tax Act, their income in the 2003-09 tax years was exempt from the Act's foreign accrual property income provisions because it was earned by a foreign bank.
Activities of the Barbados subsidiaries, consolidated through CCG Trust Corp., met the definition of “foreign bank” in Canada's Bank Act, which doesn't require an entity to be licensed as a bank under the foreign country's laws, nor to carry on a banking business as such, Justice J.R. Owen said in the ruling, dated July 4 but made public July 11.
The ruling also rejected the Canada Revenue Agency's arguments that CIT Group's corporate structure established a “conduit” intended to avoid taxation in Canada. Any movement of funds was based on the legal status of the various parties and their legal relationships, and the tax agency didn't challenge them under either the Canadian statute's general anti-avoidance rule or transfer pricing rules, it said.
“The Supreme Court of Canada has long since put to rest the notion that the sophistication of the tax planning alters the manner in which one should interpret specific provisions in the Income Tax Act,” it said, pointing to the top court's 1992 ruling in Shell Canada Ltd. v. Canada.
The ruling directed the Canada Revenue Agency to reassess the taxpayer's 2003-09 tax returns on the basis that the specified income wasn't subject to the foreign accrual property income rules. It gave the parties 30 days to make submissions on costs.
To contact the reporter on this story: Peter Menyasz in Ottawa at firstname.lastname@example.org
To contact the editor on this story: Rita McWilliams at email@example.com
The ruling is at http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/145887/index.do.
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)