“Prévost Car”: Dutch Intermediary Is “Beneficial Owner” Under Treaty

In The Queen v. Prévost Car Inc., the Federal Court of Appeal dismissed the Minister of National Revenue's appeal from the Tax Court's decision that the Canadian corporate taxpayer's parent, a Dutch holding company, was the "beneficial owner" of dividends which entitled it 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 its decision, the Federal Court of Appeal emphasized the value of the Commentaries on the OECD Model Convention as a "widely-accepted guide to the interpretation and application of the provisions of existing bilateral conventions". It also endorsed reliance on later Commentaries, to the extent that they are not in conflict with Commentaries existing at the time the specific tax treaty was entered into and have not been objected to by either treaty partner.