Source: http://taxinterpretations.com/news-of-note?page=8
Timestamp: 2019-04-22 02:08:45+00:00

Document:
BEPS Actions 8 to 10 did not effect substantial changes, i.e., the underlying principles are the same.
CRA hopes to have final guidance out (re BEPS changes) by November 2019 including clarifying the concepts of risk-free return and risk-adjusted return.
Canada has not adopted the simplification measure concerning low-value-added intragroup services – so that, rather than accepting a flat markup on intragroup service-charges because of the OECD guidance, CRA will continue to rely on IC87-2R to govern intragroup pricing until adoption of a new measure.
Penalties are usually imposed for failure to have accurate and complete contemporaneous documentation respecting the ss. 247(4)(a)(iv) to (vi) matters (regarding the underlying analysis).
CRA will audit the “story” in the underlying documentation, e.g., if the taxpayer represent that one of the parties is a low-risk distributor and CRA’s review demonstrates that it is a full-fledged distributor, penalties will probably be imposed (provided the $5 million threshold is exceeded).
Neal Armstrong. Summaries of 26 February 2019 Toronto CRA & Tax Professionals Seminar under s. 247(2) and s. 247(4)(a).
The OECD Commentary (whose examples are based in large part on the facts of treaty abuse cases in various jurisdictions, whose results the Commentary may consider to be inapplicable under the PPT test) suggest that the PPT may apply mostly in situations where there is very little real economic substance to the transactions.
Because the PPT states that a benefit under a covered tax treaty (“CTA”) "shall not be granted” where the provision applies, the application of this provision could make taxpayers worse off than under a reasonable alternative transaction, e.g., a taxpayer who has sought to lower the dividend withholding tax rate from 10% to 5% could be subject to a 25% withholding rate under this complete-denial approach.
In interpreting a similar one-of-the-principal purposes test, UK courts have held that a principal purpose "has a connotation of importance” (Travel Document Services) and that a principal purpose of a transaction may be to obtain a tax advantage even if the transaction had a commercial objective at least as important as the tax advantage (Lloyds TSB Equipment Leasing). [See also the Groupe Honco line of cases.] Accordingly, the threshold for the PPT may be lower than in most domestic general anti-avoidance rules.
Since the PPT applies where it is "reasonable to conclude" that one of the principal purposes of an arrangement or transaction was to obtain a benefit under the CTA, it also imposes a relatively low burden on the tax authority, effectively requiring taxpayers to argue that it would be unreasonable to conclude that obtaining the benefit was a principal purpose of the arrangement or transaction.
The remedial benefits rule in Art. 7(4) has only been adopted by 28 jurisdictions (not including Canada) and is poorly drafted.
Neal Armstrong. Summaries of David G. Duff, “Tax Treaty Abuse and the Principal Purpose Test – Part 2,” Canadian Tax Journal, (2018) 66:4, 947-1011 under Treaties - MLI – Art. 7(1) and Art. 7(4).
…The Officer’s literal interpretation tends to frustrate both a purposive construction of section 142 and the intent of the ETA to tax consumption of goods in Canada … [and] appears to lead to a result which is at odds with the equitable underpinnings of subsection 23(2) of the FAA.
Neal Armstrong. Summaries of Escape Trailer Industries Ltd v. Canada (Attorney General), 2019 FC 31 under Financial Administration Act, s. 23(2), ETA s. 142(1)(a) and Statutory Interpretation – Ordinary meaning.
We have published a further 6 translations of interpretations released in July and June 2012. Their descriptors and links appear below.
These are additions to our set of 789 full-text translations of French-language Rulings, Roundtable items and Technical Interpretations of the Income Tax Rulings Directorate, which covers the last 6 ¾ years of releases by the Directorate. These translations are subject to the usual (3 working weeks per month) paywall. Next week is the “open” week for March.
Neal Armstrong. Summary of Fono v. Agence du revenu du Québec, 2018 QCCQ 10534 under s. 2(1).
Investors subscribe for units of a “Fund”, both situated in and governed by the laws of a redacted non-resident jurisdiction. The units are described as representing proportionate interests in the property of a particular Subfund (holding a particular managed portfolio) but with an entitlement to exchange their co-ownership interest in that Subfund’s property for that in another Subfund.
Investors with different tax profiles are required to invest in separate Classes of units so that there is no pooling of withholding tax rates applicable to the securities in a Subfund’s portfolio.
The non-resident Depositary deals at arm’s length with the non-resident manager, and the Canadian securities are held by a Canadian-resident custodial subsidiary of the Depositary.
CRA ruled that the funds were fiscally transparent, so that non-resident investors holding units in a Subfund that, in turn, held Canadian equities, would be treated for Canadian withholding tax purposes and s. 116 purposes in the same manner as if they received a pro rata distribution on or proceeds of the Canadian securities.
This arrangement is somewhat similar to that in a 2014 ruling on an Irish contractual fund (2013-0496831R3 – see also 2015-0606141R3, 2009-0345011R3 and 2006-0199741R3), whose descriptions also looked somewhat similar to a unit trust, and was ruled upon to be a co-ownership arrangement. It is also is more dissimilar with (but still broadly similar to) that in a recent ruling on a Luxembourg investment mutual fund (2015-0605161R3).
Neal Armstrong. Summary of 2018 Ruling 2017-0738041R3 under s. 104(1).
CRA indicated that a health and welfare trust (“HWT”) which is jointly established by a union and multiple employers, can provide benefit coverage to non-unionized employees of participating employers, retired employees, and individuals who are not employees (i.e., dependants or survivors of current or retired employees where the underlying plan (i.e., a group sickness or accident insurance plan (“GSAIP”), a private health services plan (“PHSP”), or a group term life insurance policy (“GTLIP”)) allows for the provision of benefit coverage to such individuals – although a GTLIP may only provide benefit coverage to current and former (including retired) employees.
[W]here is it established that retired employees may be provided benefit coverage through a GSAIP, PHSP, or GTLIP, and none of the participating employers have a legal obligation to pay any premiums or contributions in respect of the particular plan or policy, it would appear permissible for a HWT to administer such a plan or policy provided that the trust also administers other employer-funded plans or policies.
A HWT may administer a plan that offers drug and alcohol rehabilitation services, provided the plan qualifies as a PHSP, which entails a requirement inter alia that substantially all of the premiums paid under the plan relate to the coverage of medical expenses that are eligible for the medical expense tax credit.
Neal Armstrong. Summary of 22 January 2019 External T.I. 2016-0645581E5 under s. 6(1)(a)(i).
may be willing to accept that the transfer of property between non-arm’s length parties for the nominal amount of $1 could be considered a gift. For example, if the agreement governing the transfer provides for consideration of $1 merely to ensure that the agreement is legally binding, the CRA may consider the transfer to be a gift.
… If it is determined that the transfer of property was a sale for inadequate consideration rather than a gift, paragraph 69(1)(c) would not apply.
Neal Armstrong, Summary of 24 January 2019 External T.I. 2018-0773301E5 under s. 69(1)(c).
One aspect of the duty of fairness is that, in general, a decision- maker may not fetter his discretion. However, it is well established in public law that a decision- maker may formulate a policy to enable him to exercise a discretion consistently provided that it is not applied so rigidly that it precludes the proper exercise of discretion in each case.
The simple rule is, as Arden LJ said, the internal policy must not preclude a proper exercise of the statutory discretion in each case.
Neal Armstrong. Summary of Dickinson & Ors v Revenue and Customs  EWCA Civ 2798 under ETA s. 315(3).

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