CRA adds 3 examples to its listing of abusive transactions including a blanket treaty-shopping example

A CRA webpage providing examples of transactions to which it would apply GAAR, has been updated by adding three examples (briefly summarized below):

Wuswig-based transaction

After Canco received exempt dividends from a foreign affiliate (Subco), Subco continues into Canada, the parent of Canco subscribes for preferred shares of Subco, and Subco is wound up under s. 88(2) to trigger a capital loss to Canco that is not subject to the stop-loss rules in ss. 93(2) and 93(2.01).

Treaty shopping)

A person who is not entitled to the benefits of a tax treaty uses an intermediary entity entitled to such benefits to indirectly obtain those benefits, resulting in a reduction of the amount of withholding tax otherwise payable under Part XIII.

Before giving the example quoted above (and without referencing Alta Energy), CRA stated that it “may apply the GAAR even where a non-resident would otherwise satisfy all of a treaty’s relevant provisions, including … limitation on benefits provisions and, any other anti-avoidance provision, including the principal purpose test in Article 7(1)” of the MLI.

Loss trading, Deans Knight style

CRA essentially summarized the facts in Deans Knight, and further stated that it “will consider the application of the GAAR to transactions or arrangements designed to avoid the restriction of non-capital loss carryovers for a corporation (Lossco) that would arise on an acquisition of control by a person or a group of persons (notwithstanding the composition of such group).”

Neal Armstrong. Summary of CRA Webpage, General anti-avoidance rule (GAAR), 1 April 2026 under s. 245(4).