(a) GAAR Committee
Will the GAAR Committee review all situations where an auditor proposes to apply the principal purpose test in MLI Art. 7(1) PPT so as to ensure it is consistently applied and enforced?
CRA responded that it is exploring methods of promoting consistency in the application of the PPT within the Agency and that, in this regard, the GAAR Committee may offer a useful model. The Income Tax Rulings Directorate will entertain PPT rulings once the rules are in effect.
(b) GAAR/PPT interrelationship
How will CRA apply the PPT relative to the GAAR?
After noting that s. 4.1 of the Income Tax Conventions Interpretation Act states that the GAAR applies to any benefit provided under a tax treaty, CRA indicated that it continues to contemplate the application of the GAAR to transactions undertaken primarily to secure a tax benefit accorded by a tax treaty and that the GAAR Committee has approved the application of the GAAR in certain treaty-abuse arrangements. Furthermore, in appropriate circumstances, the PPT and the GAAR could apply as alternative assessing positions.
(c) PPT relevance of GAAR jurisprudence
Will the “object and purpose” PPT test be interpreted consistently with the GAAR jurisprudence?
CRA indicated that given the differences in wording between the PPT (whose object and purpose test must be read in conjunction with the added preamble language of Art. 6) and the GAAR, it was premature to assess how the case law on s. 245(4) will inform the PPT’s application.
(d) OCD Commentary examples
What weight will the CRA give to the examples set out in paras. 182 and 187 of the draft 2017 OECD Model Commentary in determining whether a particular structure or transaction satisfies the object and purpose clause within the PPT?
CRA noted that the draft Model and Commentary had not yet been approved, and would refrain from commenting at this juncture.