On September 06, 2011, the Federal Court of Appeal is scheduled to hear an appeal by Saipem UK Limited (“Saipem UK”) against a decision of the Tax Court of Canada interpreting Article 22 of the Canada-UK Tax Treaty.
Saipem UK was a UK-incorporated company and non-resident of Canada that carried on business in Canada through a PE. Saipem UK acquired Saipem Energy International Limited (SEI), another UK-incorporated company and non-resident of Canada that carried on business in Canada through a PE. SEI was wound-up into Saipem UK under section 88 of the Canada Income Tax Act, and Saipem UK deducted certain non-capital losses of SEI pursuant to subsection 88(1.1). The Minister of National Revenue disallowed the deduction by Saipem UK on the basis that the corporations were not “Canadian Corporations” (i.e., incorporated or resident in Canada) as required by subsection 88(1.1).
Before the Tax Court, Saipem UK argued that subsection 88(1.1) violated Article 22 of the Canada-UK Tax Treaty, which prohibits a Contracting State from discriminating against a non-resident taxpayer on the basis of nationality.
The Tax Court dismissed Saipem UK’s appeal and held that subsection 88(1.1) does not discriminate on the basis of nationality since the determination of whether a corporation is a “Canadian Corporation” is not dependent on a corporation’s nationality (i.e., a corporation incorporated outside Canada may be a Canadian resident based on the “management and control” test).
For the appellant’s notice of appeal, see the Notice of Appeal of Saipem UK Limited.
For the written submissions of the appellant, see the Memorandum of Fact and Law of Saipem UK Limited.
For the written submissions of the respondent, see the Memorandum of Fact and Law of the Crown.