The Supreme Court of Canada has sided with Lobla Financial Holdings in a dispute over the tax treatment of a subsidiary operated by the company in Barbados.
In a 7-0 decision today, the top court says the Canadian provisions in the case did not apply to the company Glenhuron Bank Ltd., meaning that tax was not payable on its income in Canada.
The minister issued a reassessment to Lobla Financial that required paying taxes on Glenhuron’s income for several years because it had fallen under the provisions.
The Federal Tax Court agreed with the minister in 2018 that Glenhuron’s income does not qualify foreign banks to bear.
The court concluded that Glenhuron conducted business primarily with affiliated corporations, and not with the parties with whom it was operating at arm’s length, as required by law.
In its unanimous decision, the Supreme Court concluded that the vast majority of business was conducted between foreign affiliates of Lobla Financial and the parties at arm’s length, so the exception to the law did indeed apply.
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