Published by the Tax Group
McCarthy Tétrault FRANÇAIS VOL.3,
ISSUE 2
2011
May
2
Tax Update (Volume 3, Issue 2)



Section 116 Clearance Certificates: Relief for Treaty-Exempt and Treaty-Protected Property
A non-resident of Canada is generally taxable under the Income Tax Act (Canada) (Act) on any income or gains arising on the disposition of taxable Canadian property (TCP), except where the non-resident is entitled to a treaty exemption.
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Coupon Strips: An Easy Avoidance of Withholding Tax No More
In Lehigh Cement Limited v. The Queen, 2010 DTC 2081 (FCA) (Lehigh), the Federal Court of Appeal considered the application of the general anti-avoidance rule (GAAR) contained in section 245 of the Income Tax Act (Canada) (Act) to a coupon stripping transaction used to avoid withholding tax on interest under the former 5/25 rule contained in subsection 212(1)(b) of the Act. Although Lehigh was decided under the 5/25 rule, the decision has broad implications relevant to current law given that non-arm's length interest (subject to a treaty override) remains statutorily subject to withholding tax following the repeal of the 5/25 regime.
FULL STORY