Introducing McCarthy Tétrault’s Tax Disputes Newsletter, curating the latest news, trends and updates from our industry-leading team to help you stay informed of key developments within the market.
When a tax controversy arises, a swift and effective resolution is a business imperative. Our experienced tax litigators resolve contentious tax matters quickly and efficiently across the entire gamut of tax controversies, including with respect to audits, requests for information, objections, searches and seizures, and appeals. We have advised and defended domestic and international corporations, financial institutions, resource companies, companies in the technology space and manufacturers, as well as high net-worth individuals on tax-related disputes.
For further insight into the topics discussed in this newsletter, reach out to our Tax Disputes Group.
- Supreme Court limits the availability of equitable relief to undo unexpected tax consequences: Six years ago, the Supreme Court of Canada ruled in Fairmont and Jean Coutu that transactions could not be rectified after-the-fact to achieve a desired tax result. In Collins, the Court has now confirmed that the same principle applies to all other equitable relief, including rescission. For the Group’s complete summary on Canada v. Collins, 2022 SCC 26, click here.
- Not All Alternative Transactions Are Relevant for the Purposes of the GAAR Abuse Analysis: In 3295940, the Tax Court of Canada decided that the GAAR applied to an attempt to circumvent subsection 55(2) on a cross-redemption of shares. The plan involved circulating the capital dividend account (“CDA”) of a parent company to its subsidiary (on the first redemption), then back to the parent (on the second redemption). Through such “CDA recycling”, the parent company indirectly obtained a bump of its subsidiary’s low basis shares prior to their sale in a context where paragraph 88(1)(d) was otherwise unavailable. The decision has been appealed to the Federal Court of Appeal. For the Group’s comprehensive summary, click here.
- Incentive For Remittance Of Unclaimed Financial Assets: The Government of Québec has suggested that financial assets valued at over a billion dollars are currently being held in contravention of the Unclaimed Property Act. As a consequence, the government has adopted incentive measures to recuperate these amounts, particularly from financial institutions. Read the Group’s full summary here.
- Amount Mistakenly Recorded as Debt and Not Capital Contribution Does Not Bind Taxpayer: In Weisdorf, Chief Justice Bowman held that accounting entries do not create reality, but instead, are intended to reflect reality. The Quebec Court applied that principle in Thinaddictives in concluding that an accounting error (recording a capital contribution as debt) should not be binding for tax purposes. Read the Group’s complete commentary here.
- Deans Knight Income Corporation – What to Expect: On November 2, 2022, the Supreme Court of Canada heard the appeal in Deans Knight Income Corporation and will have the opportunity to address the uncertainty created by the Federal Court of Appeal (“FCA”). The FCA reversed the Tax Court of Canada’s decision and relied on a novel concept of “actual control” to conclude to an abuse of the “control” threshold within subsection 111(5) of the Income Tax Act (Canada) (“Act”). The FCA did not define this concept in the decision, nor is it found anywhere in the Act or other jurisprudence. Read the Group’s complete commentary here.
- During a recent presentation, the CRA confirmed that has revamped its former “Special Execution Program”, which had been dismantled in 2012 as part of a cost reduction plan. The revised “Illicit Income Review Program” is in force in most parts of the country and intends to leverage formal demands, income and commodity tax audits and aggressive debt collection to disrupt the activities of criminal organizations. It relies on partnerships between the CRA and law enforcement and economic regulators, including the Joint Chiefs of Global Tax Enforcement (J5). From a tax administration perspective, perhaps the most unusual aspect is that it’s a civil audit program under the purview of the CRA’s Criminal Investigations Directorate.”
McCarthy Tétrault Tax Perspectives blog features valuable insights from Canada’s leading tax advisors, and delivers timely updates across industries to help business leaders adeptly navigate complexities and changes in Canada’s tax regime. To subscribe to the blog, click here.
Practice Group Updates
- Dominic Bédard-Lapointe has joined McCarthy Tétrault’s National Tax Group as a partner. Based in the Montréal office, Dominic provides national support to clients and reinforces McCarthy Tétrault’s multidisciplinary expertise in Tax Litigation. Dominic brings a truly unique expertise, having worked for both national law firms and for the Canadian Department of Justice. His experience representing both taxpayers and the Crown gives him a unique perspective in the establishment of effective litigation strategies.
- Almut MacDonald has joined the National Tax Group as a first year associate, based in the firm’s Toronto office. Prior to joining McCarthy Tétrault, Almut clerked at the Federal Court of Appeal of Canada. She is working with our tax disputes team on a variety of matters, from audit to appeals.
- McCarthy Tétrault’s National Tax Group routinely hosts industry-leading events and thought-leadership sessions in each of our Canadian offices, covering a wide range of topics and trends most important to our clients and their businesses.
To view all upcoming sessions, click here.