“Beneficial Ownership”: Round One To The Taxpayer

In Prévost Car Inc. v. The Queen, the Minister of National Revenue argued that the Canadian corporate taxpayer's parent, a Dutch holding company, was a conduit and not the "beneficial owner" of dividends paid to it by the taxpayer. Therefore, it was not entitled to a reduction in the 25% rate of Canadian non-resident withholding tax to 5% under Article 10(2) of the Canada-Netherlands Income Tax Convention (the "Treaty"). The term "beneficial owner" is not defined in any of Canada's tax treaties. In a judgment released by the Tax Court of Canada on April 22, 2008, the Court rejected the Minister's argument, holding that the Dutch parent was the beneficial owner of the dividends within the meaning of Article 10(2) of the Treaty as it enjoyed all the attributes of ownership over the dividends, it was not a conduit for its shareholders, and it was not legally obligated to pay out the dividends it received