14 May 2008
The Tax Court of Canada gave its decision on 22 April 2008 in the case of Prévost Car Inc. v. Her Majesty the Queen (2008TCC231). Associate Chief Justice the Hon. Gerald J. Rip decided that a company established in the Netherlands was the beneficial owner of dividends paid by its wholly-owned Canadian subsidiary under Art. 10(2) of the Canada-Netherlands treaty. The Crown's argument that the company was not the beneficial owner was based on the facts and circumstances surrounding the payment of dividends, including the lack of substance in the Netherlands company and an agreement between its two parent companies, one resident in Sweden and the other resident in the United Kingdom, that at least 80% of the profit of the Netherlands and Canadian companies would be distributed to the Swedish and UK parents. The judge decided, however, that there was no evidence that the Netherlands company was a conduit for its parent companies, and that it was the only person that had any interest in the dividends declared by the Canadian subsidiary.
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