Marzen Artistic Aluminum Ltd. v. The Queen (2014 TCC 194)
I’m don’t know much about this kind of thing, but it doesn’t sound good for Barbados. According to our Google Alerts, the tax sector is abuzz with this latest Canadian ruling that runs 80 pages. (download the ruling here – PDF)
Comments from the cheap seats?
In a lengthy set of reasons, the Tax Court upheld all but a fraction of the CRA’s reassessment of the taxpayer, such reassessments having disallowed the deduction of approximately $7.1M of fees paid by the Canadian taxpayer to its Barbados subsidiary. The Court also upheld the imposition of a penalty under subsection 247(3) of the Act…
… from Dentons Tax Litigation blog: Marzen: Artistic Barbados tax plan defeated
Barbados puts on a happy face and buries in the press release that offshore secrecy between Bim and Canada is a thing of the past…
The Protocol amending the Agreement between Canada and Barbados for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and Capital is now in effect. It entered into force on 17 December 17, 2013.
“On November 8, 2011, Canada and Barbados signed a Protocol to amend the 1980 DTA. This Protocol, among other things, now allows entities operating in the international financial services sector to benefit from a number of provisions in the Treaty, including the provisions on residency. In addition, such entities will now be covered under the new comprehensive exchange of information provisions which now meet the OECD standard.“
Barbados values the mutually beneficial and long standing relationship with Canada and welcomes this development as it will further concretise Barbados’ principles of transparency and substance. Through our network of tax treaties, it will further solidify Barbados’ commitment to international best practices on the exchange of information.
Read the full story: Barbados Prime Minister: Protocol Takes Effect
“There was no bona fide purpose of the Barbados Spousal Trust other than to obtain the tax benefit,”
“I find the only motivation for this trust was to avoid tax, which would result in more money in Mrs. Antle’s hands. There was no element of estate planning. Mr. Antle could give the shares to his wife, pay the tax, leaving his wife $1.1 million, or he could settle a Barbados Spousal Trust, pay no tax, and leave $1.4 million in his wife’s hands. The purpose of the transaction is self-evident.”
… Canadian Appeal Court Judge Miller
Barbados Trust strategy called “Sham”
Sometimes I can’t understand all the ins and outs of how foreigners set up businesses and trusts in Barbados, but I do know why they do it: to avoid paying taxes back home.
The highest court in Canada has just turned down an appeal of a case involving the setting up of a trust in Barbados – done back in 1999 so a Canadian politician could avoid paying taxes on Canadian profits. Paul Antle transferred the company to a Barbados trust owned by his wife, who would then sell the company, take the profits in Barbados and make a loan to the husband back in Canada.
The tax courts didn’t take kindly to that maneuvering and now the high Canadian court agrees.
So once more our offshore banking and companies industry feels the pinch. We need more tourists ’bout hey…
From the Canadian CBC…
A Federal Court of Appeal judge ruled in 2010 that a trust set up in the Caribbean by the wife of Liberal leadership candidate Paul Antle was a “sham” used to incorrectly shield more than $1 million from capital gains taxes.
That decision went a step further than a previous Tax Court of Canada ruling.
… continue reading this article at the Canadian CBC: Liberal hopeful lost ‘sham’ Barbados trust tax case
Back in early May, BFP told our readers how a Canadian company avoided 1.4 billion in taxes by using an offshore subsidiary. We speculated what it means for Barbados as the Canadian tax authorities attempt to track down and close the tax loopholes that, frankly, are the life blood of our offshore banking and financial industries. (See Cameco tax case is scary for Barbados!)
In the Cameco case profits were diverted to a Swiss based subsidiary that paid a far lower tax rate than the Canadian operations of the uranium producing company.
Now one of our sharp-eyed BFP readers has come up with five Barbados offshore companies that look like they could have something to do with the Canadian Cameco company involved in the international tax mess. Some of the Directors appear throughout the companies and we wonder what it all means. According to some of the news accounts, Cameco shareholders are facing some hefty losses depending on the outcome in the Canadian courts.
We will continue to follow this case as it is a canary in the coal mine for the health of our offshore banking and companies revenues.
The Barbados offshore companies are:
CAMECO GLOBAL SOUTH AMERICA INC.
CAMECO INSURANCE SERVICES INC
CAMECO RESOURCES, L.L.C.
CAMECO SERVICES INC.
CAMECO URANIUM INC.
Here are the names of the Company Directors and Officers. Hmmmmm…. I recognize a few names! Continue reading
How a Canadian company avoided 1.4 billion in taxes by using an offshore subsidiary and what it means for Barbados
by Not Taken
Yet another interesting and scary for Barbados article in the business section of a major Canadian newspaper, The Globe and Mail: Cameco’s $800-million tax battle
I have been sending these recent articles as a public service so the Ministry of Finance and the Barbados Central Bank Governor have a heads up on the attack on Canadian tax evaders/avoiders that is undoubtedly about to hit the Barbados offshore industry; if in fact it has not already hit – but unreported.
This is very bad news for Barbados revenue sources.
While the Cameco case involves its Swiss subsidiary, it is probably just the tip of the iceberg in CRA’s efforts to collect taxes due to Canada. There must be hundreds, if not thousands, of “Canadaco (Barbados) Limited” businesses doing the same same transfer pricing schemes (scams) in order to pay 2% income tax to Barbados, rather than 27% to Canada.
Even those Canadian companies not not already being audited for this this type of tax “management” may decide for close up shop in Barbados to avoid the publicity that a CRA audit will bring.
Cameco’s CFO, retorts that Cameco Europe has its own board of directors and a full-time CEO, Gerhard Glattes, who has no other duties with the company. Cameco Europe provides Cameco with compensation for the management duties – like legal advice – it does not have its own staff for. “It was established in accordance with all relevant laws and regulations when it was set up.”
The Barbados registered Canadaco subsidiaries’ own boards of directors and full-time CEOs who have no other duties with the Canadian company should start planning for alternative sources of income. And of course it will have serious implications for the Barbados services providers; the legal community, the management/bookkeeping companies, and the accountants when it happens.
Barbados Advocate got fooled too… “The private merchant bank, which operates primarily in New York and Barbados, officially launched the new franchise-based Twenty20 tournament yesterday.”
Caribbean Premier League forgot to ask “When is a bank not a bank?”
by Googly Spinner
Verus International not a bank in Barbados!
The West Indies Cricket Board just learned a lesson about the word ‘assume’. It’s that old lesson that if I ‘assume’ something it can make an ‘ass’ out of ‘u’ and ‘me’. Ass-u-me.
Yes, the Caribbean Premier League was a multi-million dollar deal with a big press announcement, pretty girls, lots of champagne and little cracker things – but somebody didn’t do their homework. Now all involved are more than a little embarrassed by the Barbados Central Bank announcement that the league source of funding and investment, Verus International ‘Merchant Bank’, is not a merchant bank in Barbados.
Verus International is nothing more than a name in a shoebox on a shelf in one of those cozy little offices where a thousand offshore companies operate from a single desk. It is not licensed to operate as a bank in Barbados but even the news media called Verus a “Private Merchant Bank operating in Barbados“
That’s Barbados offshore corporations for you and that’s alright so long as everybody knows how things are… except that Verus International claimed they were a merchant bank operating in Barbados. The Versus International website doesn’t say that now, and they replaced their old website with a single page while they pedal faster to remove all the evidence on the internet. The Wayback archives never forget though!
Whether Verus International is licensed to be a Merchant Bank in Barbados might matter or it might not. Not much of the offshore money stays here anyway – Barbados is mostly a transit point for moving funds around, not a final destination.
Or… the lack of a banking license and government oversight and regulations might be important if things go bad.
Not a good beginning for the CPL deal because it shows that the West Indies Cricket Board management doesn’t do their basic homework and due diligence. That fault can make any organisation meat on a stick for the predators who can smell weakness and inexperience from miles away.
“While the private military/security industry rejects the characterisation of their forces as mercenaries, Blackwater executives have turned the grey area in which they operate into a brand asset. The company has been quietly marketing its services to foreign governments and corporations through an off-shore affiliate, Greystone Ltd, registered in Barbados.”
… Jeremy Scahill, author of Blackwater: The Rise of the World’s Most Powerful Mercenary Army
Shouldn’t Barbados feel at least morally responsible for the activities of corporations formed under our laws?
Murder, arms trafficking, shooting civilians, drunken mercenaries shooting each other.
All facilitated by the world of offshore corporations in Barbados.
Keltruth Blog has the story and the links: Blackwater Murder Allegations – Should Barbados be Concerned about Blackwater’s Off-Shore Affiliate Greystone