Alberta Mirror

Monday, December 4, 2023

Loblaw Financial triumphs Supreme Court trial over the tax practice of Barbados subsidiary


Key takeaways: 

  • Loblaw Financial Holdings should not have to spend Canadian taxes on earnings from a subsidiary the firm ran in Barbados. 
  • The Supreme Court of Canada has ordered.

Loblaw Financial Holdings wins the Supreme Court trial: 

In a 7-0 ruling Friday, the top court said Canadian provisions at a point in the case do not refer to the subsidiary, Glenhuron Bank, suggesting a tax on its income is not due in Canada.

Loblaw Financial, a section of a larger group that includes the well-known grocery retailer, joined the subsidiary in 1992. Barbados’ central bank published a licence for it to work as a foreign bank.

In 2013, Glenhuron was destroyed, and its assets were sold to assist Loblaw to buy Shoppers Drug Mart.

Loblaw Financial and related firms made capital investments in Glenhuron, which was involved in corporate banking, between 1992 and 2000.

For various taxation years from 2001 and 2010, Loblaw Financial did not include income received by Glenhuron in its Canadian tax returns as foreign accrual property assets, known as FAPI.

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Loblaw Financial wins a supreme court trial

The federal revenue minister published reassessments to Loblaw Financial that wanted it to pay tax on Glenhuron’s income in the areas it fell under the regions.

The federal Tax Court concurred with the minister in 2018 that Glenhuron’s income did not change for an elimination provided to foreign banks.

The court decided that Glenhuron managed business especially with associated corporations, not parties with whom it was dealing at arm’s length, as expected by the legislation.

The Federal Court of Appeal reversed the decision, including the reassessments back to the minister for reconsideration. The Crown then took its claim to the Supreme Court.

In its collective judgment, the top court decided the large bulk of the business was handled between Loblaw Financial’s foreign subsidiary and arm’s-length parties, so the difference in the law did implement.

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