C&W Offshore: Beneficial Ownership In A Back-to-back Loan Context

Overview

In C & W Offshore Ltd. v. The King,¹ the Tax Court of Canada held that a United Kingdom corporation (“InterMoor UK”) was the beneficial owner of rental payments made by an arm’s length Canadian corporation (“C&W”) under a sublease of mooring chains, even though the bulk of those payments were remitted by InterMoor UK to its Norwegian affiliate (“InterMoor Norway”) from which it had originally leased the mooring chains. The Tax Court concluded that C&W failed to withhold the non-resident tax under Part XIII of the Income Tax Act (Canada) and was subject to a penalty of 10% of the amounts it failed to withhold.

Background

C&W is a Canadian corporation specializing in the manufacture of metal structures for Newfoundland and Labrador’s offshore oil and gas industry. In December 2013, one of its customers, Seadrill Canada, asked C&W to urgently procure and deliver heavy subsea mooring chains. To fulfill this request, C&W contacted InterMoor UK, a supplier of offshore mooring