The Canada Revenue Agency ("CRA") recently lost in Tax
Court against a taxpayer that had structured their operations to
minimize Canadian tax. The case, Velcro Canada Inc. v. The
Queen, ("Velcro Canada") is the first case
since the FCA decision of Prevost Car Inc. v. the Queen
("Prevost Car"), (
see our blog on March 18, 2009) that deals with the concept of
"beneficial ownership" in a treaty shopping context. The
purpose of this blog is to outline how treaty shopping works and
how the CRA has tried to assess against this practice.
By way of background, treaty shopping is generally a strategy
where multinational corporations structure their affairs to
minimize their overall global taxes. Some of the planning, as in
this case, involves the use of intellectual property. Intellectual
property may be "trade secrets" that allows one to
manufacture and sell a particular product. As consideration for
allowing someone to use their intellectual property, a royalty is
often
