Montano Cabezas

The appeals concerned the tax consequences of dividends paid by Husky Energy Inc. to two non-resident corporations under securities lending arrangements.

The Minister assessed Husky for failing to withhold Part XIII tax at the 15% rate under the Canada-Barbados Income Tax Convention, and assessed the successor corporations of the Barbados entities for the shortfall.

The Tax Court held that the Luxembourg entities were not the beneficial owners of the dividends under the Canada-Luxembourg Income Tax Convention because they were contractually obligated to pay the dividend amounts to the Barbados entities.

Consequently, Husky was liable for Part XIII tax at the 25% rate.

However, because the Minister only assessed the Barbados successor corporations and not the Luxembourg entities, the appeals of the Barbados successor corporations were allowed and their assessments vacated.

Husky's appeal was dismissed.

The appellants, who donated wine to registered charities and claimed tax credits, brought motions to strike out several assumptions of fact pleaded in the respondent's replies.

The appellants argued the assumptions lacked precision, were irrelevant, or improperly pertained to third parties.

The Tax Court of Canada struck out assumptions relating to the actions of other donors and prior transactions with leave to amend, finding them too broad or lacking a specified link to the appellants.

The remaining assumptions regarding market conditions and appraisal methodology were allowed to stand as they provided relevant context for the fair market value determinations.

The appellant corporation, originally resident in the Netherlands, appealed a reassessment of a capital gain realized on the sale of a partnership interest in 2009.

The Federal Court of Appeal had previously affirmed the Tax Court's finding that the appellant was a resident of Canada in 2009 but remitted the matter for reconsideration of the application of subsection 128.1(1) of the Income Tax Act and the Canada-Netherlands Income Tax Convention.

On redetermination, the Tax Court held that the appellant became a resident of Canada in 1998, before acquiring the partnership interest, meaning subsection 128.1(1) did not apply to step up its cost base.

The Court also held that the appellant failed to prove it was subject to comprehensive taxation in the Netherlands, and thus the treaty exemption for capital gains did not apply.

The appeal was dismissed.