The Resource FLSmidth Limited v R : 2012 TCC 3

FLSmidth Limited v R : 2012 TCC 3

FLSmidth Limited v R : 2012 TCC 3
FLSmidth Limited v R : 2012 TCC 3
Judgment by the Tax Court of Canada dated 3 January 2012. The taxpayer was a Canadian company and a wholly owned subsidiary of another Canadian corporation, GLV. GLV set up a US limited partnership in which the taxpayer had a 98.9% interest, GLV had a 1% interest and the general partner (another wholly-owned subsidiary of GLV) a 0.1% interest. This limited partnership owned all the shares in a Nova Scotia Unlimited Liability Company (NSULC) which in turn owned all the shares of a US limited liability company (LLC). The partnership subscribed for shares in NSULC using borrowed funds. NZULC used the funds from those subscriptions to subscribe for shares in the LLC. LLC used the proceeds to make interest-bearing loans to another subsidiary of GLV (Holdings). Holdings used the loans to provide capital and loans to indirectly wholly owned subsidiaries of GLV to buy US companies. LLC earned interest income from Holdings, and paid dividends to NSULC. NSULC paid dividends to the limited partnership which paid interest on the money it had borrowed to subscribe for the NSULC shares. The issue in this appeal is whether the taxpayer is entitled to a deduction under subsection 20(12) of the Income Tax Act for its share of U.S. income tax paid by a limited partnership of which it was a member. As a result of the different treatment of the hybrid entities in the GL&V structure, the income of the limited partnership was calculated in a different manner for Canadian tax purposes than for U.S. tax purposes. This case considered the application of domestic law and treaty relief against double taxation in a context involving a hybrid financing structure commonly referred to as a "tower"
Citation source
In: International tax law reports. - London. - Vol. 14 (2012),
Nikolakakis, A
Geographic coverage
North America
Language note
Baker, P
  • case law
  • tax treaty
  • hybrid financing
  • foreign tax credit
  • dividend
  • double dipping
FLSmidth Limited v R : 2012 TCC 3

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