Tax Court of Canada holds
the Dutch co. (appellant) as tax resident of Canada as it was centrally managed
and controlled from Canada through the Backxes (shareholders in appellant co.
and immigrated to Canada), upholds capital gains taxability for disposition of
a partnership interest in a dairy-farm operation located in Ontario ; Notes
that in subject tax year 2009, the Backxes incorporated Dairy Farm co. in
Canada and transferred their 51% interest in the Dairy-farm partnership to the
company, rejects appellant’s contention that it was non-resident in Canada
since it was incorporated in the Netherlands and its sole director (Ms. Van
Gorp, a relative of the Backxes) was also from the Netherlands; Firstly, Court
observes that the common law test for making the determination of residential
status is the central management and control test, rules that cogent evidence
is required to displace the well-established notion that de jure directors hold
primary responsibility for the management and control of a company; Observes
that in present case, despite no experience in farming, Ms. Van Gorp had
accepted the title of director to assist the Backxes, further observes that she
neither participated in the decision to invest in the Farm Partnership nor in
the decision to dispose of the Farm Partnership in 2009 and merely implemented
decision made by the Backxes in Canada; Accepts Revenue’s stand that although
the Appellant was registered and incorporated in the Netherlands,it was the
Backxes who assumed effective and independent control of the Appellant from
Canada, and its sole director, Ms. Van Gorp, performed only
administrative/clerical tasks in the Netherlands.
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