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.
