The Crown has confirmed that decision of the Federal Court of Appeal ("FCA") in Prévost Car, 2009 FCA 57, will not be appealed. Further to our previous article, the decision of the FCA in Prévost Car held that the Canada Revenue Agency ("CRA") could not disregard a holding company in an intermediary jurisdiction with a low withholding tax rate in respect of dividends paid by Prévost Car to the holding company, and thereby apply a higher withholding tax rate as if such dividends were paid to a company higher up the corporate chain in another jurisdiction with a higher applicable withholding tax rate.

The decision of the Crown not to appeal to the Supreme Court of Canada surely provides great relief and comfort to the particular taxpayer involved in the case, Prévost Car, but there is still cause for concern for taxpayers at large. The facts in Prévost Car were favourable for the taxpayer and that is presumably why the Crown chose not to pursue an appeal.

The CRA will certainly not stop trying to attack such holding structures, thus taxpayers are best advised to be diligent in planning and implementing international structures to guard against the denial of treaty benefits. See our previous article for recommended steps for taxpayers to take to strengthen international structures in this regard.