• 2010 Tax Avoidance Cases Update
  • December 13, 2010 | Authors: Douglas J. Powrie; Stephanie A. Wong
  • Law Firms: Borden Ladner Gervais LLP - Vancouver Office ; Borden Ladner Gervais LLP - Toronto Office
  • The Canadian courts have recently considered appeals of several cases in which the Crown has invoked the general anti-avoidance rule (GAAR) to challenge tax avoidance transactions. In Lehigh Cement, the Crown was unable to apply the GAAR because it could not meet its burden of establishing the taxpayer’s abusive tax avoidance in the context of planning that had interest paid (free of withholding tax) to an arms-length bank in respect of principal owed to an affiliated corporation. In Collins & Aikman, the Crown was similarly unable to meet its burden in seeking to apply the GAAR to the tax benefits obtained from planning in an unusual fact pattern (a non-resident’s investment in a Canadian operating company was held through a Canadian incorporated holding company that was a non-resident of Canada).