Canada Revenue Agency Accepting Certain Refund Claims by U.S. LLCs

In a recently released published statement, the Canada Revenue Agency (CRA) indicated that, based on the decision of the Tax Court of Canada in TD Securities (USA) LLC v. The Queen,¹ it will allow requests for refunds of excess income or withholding tax paid under the Income Tax Act (Canada) (the Act) by certain U.S. limited liability companies (LLCs). While it is helpful that the CRA is partially accepting the decision of the Tax Court, the CRA appears to be attempting to limit its application in a manner that is not consistent with the context or purpose of the Treaty.

In TD Securities, the Tax Court held that a U.S. LLC was "liable to tax" in, and therefore a resident of, the United States for purposes of Treaty. The Court concluded that the taxpayer in that case was a U.S. resident since the United States retained and exercised the jurisdiction to tax the worldwide income of the taxpayer (including its Canadian branch income) on a comprehensive basis,