50 million paid to Barbados | The Rémillards win against the tax authorities

The tax authorities have just lost an important battle against the family of ex-waste management magnate Lucien Rémillard, who became a “non-domiciled tax resident” of Barbados. The Tax Court of Canada has just validated the payment of more than $50 million that his family trust made to him, avoiding around ten million in taxes, plus interest.

The dispute had lasted for five years between Ottawa and the Rémillards. The decision of Judge Guy Smith allows the millions paid to the patriarch to be deducted from the income of the trust, of which he is the beneficiary with his sons Maxime and Julien.

In 2013, the businessman sold his landfill company RCI Environnement to the American garbage giant Waste Management for around 300 million.

The same year, Lucien Rémillard said he stopped living in Canada to become a resident of Barbados, a notorious tax haven. Then the trust made him a big payment of 30 million.

In 2015, Rémillard sold the luxurious Saint-James hotel, in Old Montreal, for 24 million. Then the Historia trust made him another payment of 20 million.

The trust then reduced its taxable income by an amount equivalent to the two payments (more than 50 million). The deduction produced savings of 17 million in federal and Quebec taxes.

Small consolation for the taxman: the law provides for a 15% tax in Ottawa when paying a dividend to a non-resident, in the case of a country with a tax treaty with Canada, such as Barbados. In 2013 and 2015, the Historia trust therefore had to withhold 7.5 million from payments to Rémillard, who therefore received checks totaling 42.5 million at the time.

Quebec, for its part, did not collect a penny of tax on this sum.

Around ten million in lost taxes

Total shortfall for the tax authorities: 9.5 million, in addition to interest of more than 3 million, according to calculations by The Press.

The Historia Trust’s tax lawyer, Paul Ryan, assisted The Press to understand certain technical points of the decision, but reserved its comments, given that the deadlines for appeal have not expired.

The Justice Canada prosecutor on file, Vlad Zolia, refused to answer our questions and referred us to the government communications department. Revenue Canada, however, flatly refused to provide any explanation to understand the cause. Ottawa also did not want to say whether it intended to appeal.

Resident of Barbados

Since 2013, Lucien Rémillard claims to no longer live in Canada and to have become a tax resident of Barbados.

In 2015, Ottawa began an audit of his place of residence, including sending requests for information to the United States, Switzerland and Barbados. Lucien Rémillard tried to prevent these steps, but in 2022, the Federal Court refused to cancel the proceedings.

In his decision, the judge explains that a Revenue Canada auditor also contacted the Joint International Working Group on Information Sharing and Collaboration. This organization of the Organization for Economic Co-operation and Development (OECD) tries to “identify tax payers who claim to emigrate in order to avoid paying taxes”, he underlines.

In a letter to Revenue Canada in 2017, Rémillard’s former lawyer stated that his client is a “non-domiciled resident” of Barbados. During his stays in the country, “he resides at the main or secondary residences of his sons”, he also declared to the tax authorities, according to the 2022 judgment.

Revenue Canada then asked him to “explain what a non-domiciled resident of Barbados is,” the decision says, without specifying what response the taxman got.

The most recent decision on the 50 million payment from Judge Guy Smith affirms that Ottawa still denies that Rémillard is a tax resident of the Caribbean island.

According to information from The PressRevenue Canada’s audit on this subject, however, ended in 2023, while the judge was under deliberation.

The impact of a tax treaty

“What hurts is the interposition of a tax haven,” says Guy Goulet, professor of taxation at the University of Quebec in Outaouais. If the beneficiary had been in France for example, he would have at least contributed to public services elsewhere. »

Dividends of Canadian origin paid to non-residents are taxed at 25% in general, but only at 15% if they are located in a country with which Canada has such a convention.

Barbados’ agreement with Ottawa therefore allowed Rémillard to save 5 million in taxes on its 50 million dividend, says Mr. Goulet. “One might wonder why Canada signed such a convention. »