Tax exemption: Supreme Court rules in favor of Leblau

The Canadian Supreme Court ruled in favor of Loblaw Financial Holdings Inc. In the case against the Canadian tax authorities, which demanded sums relating to profits attributable to one of its subsidiaries located in Barbados.

In her ruling Friday, Judge Cotet ruled that Loblau “is not obligated to pay tax on income earned by Glenhoron” during the years the federal government claims.

In Canada’s income tax returns for the years 2001 to 2005, 2008 and 2010, Loblaw did not include income for Glenhuron Bank, its Barbados branch, claiming that such income was not subject to tax law. Income tax.

Then Canada’s Minister of National Revenue, Diane Lee Bothelier, refused the tax exemption and required the company to pay the contributions it deemed “accumulated foreign income, derived from property (REATB)”.

The case was taken to the Canadian Tax Court, where the minister successfully argued that the exemption did not apply. Loblau turned to the Federal Court of Appeal, which ruled in his favour. The minister then went to the Supreme Court of Canada, which also confirmed that the exemption did indeed apply.

In fact, a bank can take advantage of the tax exemption in respect of this income if it deals primarily with companies that have no relation to it. This is called the “arm length requirement”.

“Glenhuron Bank Limited was a regulated foreign bank with the equivalent of more than five full-time employees in 2001, during 2005, 2008 and 2010, but it conducted its business primarily with people associated with it. Reliance on it and, therefore, its income came from an investment business and must be Inclusion in the appellant’s income as accumulated foreign income from property (“REATB”), reads the decision.