Garron And Antle: 'Offshore Trusts 101' In The Tax Court Of Canada
Mondaq Business Briefing › Canada Law Articles in English (2009)
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Garron And Antle: 'Offshore Trusts 101' In The Tax Court Of Canada
Two recent cases of the Tax Court of Canada have given the Canadian tax community much on which to reflect in the context of offshore tax planning. Each case involved a transaction in which a non-resident trust was the centerpiece of a series of transactions undertaken by a Canadian-resident individual to avoid Canadian income taxation on gains arising on a disposition of property — in each case, shares of a Canadian-resident corporation — to an arm's-length party. The Tax Court upheld the reassessment under appeal in each case and, while the outcome of the cases may not have been surprising, the approaches that the Tax Court used to get there were perhaps a bit unexpected.
Garron Garron Family Trust v. The Queen1 involved tax planning that shareholders of a Canadian-resident company had undertaken in anticipation of a possible future sale of the company's shares. In effect, the tax planning involved an estate freeze transaction with growth shares issued to an offshore trust. Prior to implementation of the tax planning, shares of the corporation, PMPL Holdings Inc., were held equally by Andrew Dunin and a holding company whose shareholders included Myron Garron, Mr. Garron's spouse, and a Garron family trust. Each of the direct and indirect PMPL shareholders was a person resident in Canada for purposes of the Income Tax Act (Canada). At the outset, separate trusts were established under the laws of St. Vincent for the benefit of the Dunin family (Summersby) and the Garron family (Fundy), respectively. The sole trustee of each trust was a corporate trustee incorporated in, and licensed under the laws of, Barbados. The terms of ea...See the full content of this document
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