(Ottawa) The Supreme Court of Canada ruled in favor of Loblaw Financial Holdings in the case between the Canadian tax authorities, which claimed undue sums related to earnings attributed to a subsidiary of the company in Barbados.
In a unanimous decision of seven judges, the court declares that the articles invoked by the federal government do not apply to the case of the Glenhuron subsidiary, which means that its earnings are not taxable in Canada.
According to what can be read in the decision, the Minister of National Revenue, Diane LeBouthillier, demanded the payment of contributions to Loblaw for what she considered to be “accumulated foreign income, derived from property (REATB)” by the through its subsidiary Glenhuron. The contributions claimed were spread over several years, from 2001 to 2005 as well as 2008 and 2010.
The Tax Court sided with the minister in 2018, arguing that Glenhuron’s income could not benefit from the exclusion provisions for financial institutions.
The court then concluded that “although Glenhuron was a regulated foreign bank […], she mainly carried out her business with people with whom she was not at arm’s length ”, which disqualified her from the criteria provided for the exclusion.
In its unanimous decision, the Supreme Court determined that “while the capital contributions and supervision of the company are excluded from the review, the activities of the Glenhuron investment company have been carried out primarily with persons with whom it was dealing at arm’s length ”and therefore qualifies for the exclusion relating to financial institutions provided for by law.