Tax Treaty Case Law around the Globe 2020

S. 33Chapter 3 Canada: Corporate Residence and the Treaty Tie-Breaker Rule – Landbouwbedrijf Backx B.V. v. The Queen

David G. Duff

3.1. Introduction

Like article 4(3) of the OECD Model Tax Convention (OECD Model), article 4(3) of the Canada-Netherlands Income Tax Treaty (1986) contains a tie-breaker rule for a person other than an individual that is resident in both contracting states, stipulating that “the competent authorities of the States shall endeavour to settle the question by mutual agreement having regard to its place of effective management, the place where it is incorporated or otherwise constituted and any other relevant factors”. In the absence of such agreement, this provision further provides that the person “shall be deemed not to be a resident of either State” for the purposes of the distributive provisions in articles 6-21, a special rule for offshore activities in article 23 and the non-discrimination provision in article 24.

In Landbouwbedrijf Backx B.V. v. The Queen, the taxpayer argued, among other things, that article 4(3) of the Canada-Netherlands Tax Treaty (1986) deemed it not to be a resident of Canada for domestic tax purposes if it were resident in both Canada a...