Treaty Shopping: MIL, MLI And ALTA Things In Between

On February 12, the Federal Court of Appeal (FCA) released its decision in The Queen v. Alta Energy Luxembourg S.a.r.l.¹ (Alta Energy), a case that represents an attempt by the Canadian tax authority to relitigate the issue of whether Canada’s domestic general anti-avoidance rule (GAAR) can apply to curtail so-called “treaty shopping”.²

What you need to know

• The FCA in Alta Energy unanimously upheld the decision of the lower court that the GAAR did not apply to deny the foreign taxpayer’s claim for a treaty-based exemption from capital gains tax arising on a sale of shares of a Canadian subsidiary that derived their value from resource properties in Alberta.
  • In the earlier decision of The Queen v. MIL (Investments) S.A.,³ the Canadian tax authority had similarly asserted that the GAAR should apply to deny treaty benefits in a treaty shopping context, without success.