News of Note
ICA approval of the Anglo American acquisition of Teck might require it to have central management and control in Canada
Email this ContentIt is proposed that an indirect CBCA subsidiary (“ExchangeCo”) of Anglo American (a UK company) will acquire all the shares of Teck Resources in consideration for Anglo shares pursuant to a CBCA Plan of Arrangement. The Anglo shares will either be delivered by ExchangeCo directly to Teck shareholders or, in the case of resident Canadian who have validly so opted, it will issue Exchangeable Shares that are exchangeable for Anglo shares to them (with such holders being required to deliver any s. 85 election forms within 75 days of the Arrangement effective date). This Exchangeable Shares feature is unusual in that it is proposed that the Anglo shares into which the Exchangeable Shares would be exchangeable would be issued on the arrangement date to a Jersey holding company held by a special purpose trust, to be held there until the exchange right was exercised.
It may be unclear whether Teck would be an s. 212.3(10)(f) corporation. The steps seek to maximize the stated capital of the shares of "Callco" (through which Anglo holds its ExchangeCo shares) issued to Anglo.
A special dividend in the amount of $4.5 billion, as adjusted to take into account any departures from the expected ordinary course dividends to be paid by Anglo American or Teck, will be paid in order to increase the relative market capitalization of Teck from 34% to 37.6%.
As announced in a December 15, 2025 press release, the conditions imposed under the Investment Canada Act for approving the merger included the following:
- Anglo Teck's global headquarters will be located in Canada.
- A significant majority of its senior management, including the CEO, Deputy CEO, and CFO as executive directors, will have their principal offices and reside primarily in Canada.
- A substantial proportion of Anglo Teck plc’s Board of Directors will be Canadian, comprising the Anglo Teck executive directors residing primarily in Canada and other Canadian members.
- Anglo Teck will maintain a TSX listing.
- Anglo Teck will invest at least Cdn.$4.5 billion in Canada within five years, including in connection with specified initiatives.
Note that the Canada-UK treaty (and MLI replacement rule) does not have an automatic tiebreaker rule for determining the residence of a UK company that has its central management and control in Canada – only a mutual agreement clause.
Teck shareholders that own more than 2% of the outstanding Teck shares could be subject to Peruvian tax at the rate of 30% on the proportion of any gain arising from the exchange of the Teck shares for Anglo shares or Exchangeable Shares that is attributable to the value of the shares of the underlying Peruvian entity, subject to any applicable Treaty exemption.
Neal Armstrong. Summary of Management Proxy Circular of Teck Resources Limited (“Teck”) respecting its acquisition by Anglo American plc (“Anglo American”), filed on November 11, 2025 and December 15, 2025 press release of Teck and Anglo American under Mergers & Acquisitions – Cross-Border Acquisitions – Inbound – Exchangeable Share Acquisitions.
CRA provides no-disposition rulings respecting the squeeze-out merger of a Delaware limited partnership with a newly created Delaware LP with no assets
A Canadian-resident individual holds an interest in a Delaware limited partnership (USLP2) governed by the DRULPA directly and through a Canadian and Delaware limited partnership. In order to squeeze out minority partners with limited partnership interests in USLP2 of under 1% (the “de minimis partners”), a new subsidiary limited partnership (“New LP”) will be formed under the DRULPA which will be wholly owned by USLP2 directly and through an LLC general partner and which will have no assets.
USLP2 and New LP will then be merged under the DRULPA, with USLP2 designated as the survivor of the merger, and with the partnership interests of the de minimis partners cancelled on the merger in exchange for cash consideration. The ruling letter states that, under Delaware law, USLP2 will remain the same legal entity immediately following the merger as it was before the merger and that, under the limited partnership agreement, this transaction will not cause a dissolution of USLP2.
CRA ruled that the merger will not result in any disposition of any relevant partnership interests in USLP2 or a disposition of any of the assets of USLP2, other than its interest in New LP and its disposition of cash to the de minimis partners.
Neal Armstrong. Summary of 2023 Ruling 2022-0924531R3 under s. 248(1) – disposition.
We have translated 6 more CRA severed letters
We have translated a further CRA ruling released last week and 5 CRA interpretations released in April of 1999. Their descriptors and links appear below.
These are additions to our set of 3,580 full-text translations of French-language Technical Interpretation and Roundtable items (plus some ruling letters) of the Income Tax Rulings Directorate, which covers all of the last 27 years of releases of such items by the Directorate. These translations are subject to our paywall (applicable after the 5th of each month).
CRA rules on a trust-to-trust transfer to permit indefeasible vesting before the 21st anniversary
CRA ruled on transactions under which a discretionary family trust, which is approaching the 21st anniversary of its settlement, transfers all its property for no consideration to a newly-settled trust with the same trustees and beneficiaries and virtually identical terms, except that the trustees now have the discretion to cause the interests in the trust to vest indefeasibly in one or more of the beneficiaries. Following such transfer, the trustees, by deed, cause all the interests to vest indefeasibly in one beneficiary (father).
CRA ruled respecting inter alia:
- the application of the no-disposition rule in para. (f) of “disposition” and of the trust continuity rule in s.104(25.1)
- the 21-year rule in s. 104(4) not applying provided that the declaration of indefeasible vesting occurs within 21 years of the settling of the first trust
- no loss restriction event regarding private corporations included in the trust corpus
Neal Armstrong. Summary of 2025 Ruling 2024-1036051R3 F under s. 108(1) – trust – (g).
CRA finds that a person can be a resident contributor based on deemed contributions made to a non-resident trust before 2007
CRA found that the post-2006 version of the s. 94 rules applied where a factually non-resident trust or its wholly owned subsidiary subscribed for shares of a resident corporation prior to 2007 with no election being made for an earlier application date. In this regard, CRA noted that the definition of "contributor" contemplated testing that status based on contributions made to a trust at any time before the testing time. Thus, the pre-2007 contribution would be by a “contributor” to the trust (unless an exempt person) - and such contributor, if also resident in Canada at the testing time, would generally be a "resident contributor" to the trust.
Furthermore, the deemed contribution rules in s. 94(2)(a) or (g), which reference their application “at any time” could also be triggered on the basis of deemed contributions occurring before the trust's 2007 taxation year.
CRA also confirmed that, by virtue of s. 4.3 of the Income Tax Conventions Interpretation Act, a trust which is deemed to be resident in Canada pursuant to s. 94(3) will be a resident of Canada and only of Canada for treaty purposes.
Neal Armstrong. Summaries of 24 March 2026 External T.I. 2025-1061181E5 under s. 94(1) - contributor and Income Tax Conventions Interpretation Act, s. 4.3.
CRA finds that the s. 37(1)(a)(i.01) deduction was not available to a company that did not control the research and had no right to the results
S. 37(1)(a)(i.01) provides a deduction for current SR&ED carried on in Canada that is related to the business of the taxpayer and that is directly undertaken “on behalf of” the taxpayer. CRA stated:
“[O]n behalf of” refers to a situation where SR&ED is contracted out by the taxpayer to another party (“the Performer”), the taxpayer exercises some direction or control or some other involvement in the SR&ED undertaken by the Performer and the taxpayer acquires or maintains rights to use the results of the SR&ED.
Accordingly, s. 37(1)(a)(i.01) was not available where the claimant administered an SR&ED program conducted for a pharmaceutical company at hospitals and universities but had no control over the research or right to use the results.
Neal Armstrong. Summary of 13 April 2026 Internal T.I. 2025-1082711I7 under s. 37(1)(a)(i.01).
CRA finds that a partner does not have the discretion to not recognize a partnership loss allocated to it
CRA found that a partner was required to include in computing its income the amount allocated to it by the partnership as a loss from its business (presumably reflecting the deduction by the partnership of discretionary deductions), rather than the partner having the discretion to not include that loss in computing its income under s. 3. CRA stated:
[C]laiming a deduction in computing a loss from a source and including the loss itself from a particular source in the computation of net income for the year are two distinct concepts. The fact that one (i.e. claiming a deduction) may be discretionary does not lead to the conclusion that the other (i.e. including a loss) is also discretionary.
Where taxpayers have discretion in respect of the utilization of a loss, it is expressly provided for under the relevant provisions of the Act, such as subsection 111(1) … . Such discretion is not provided for in respect of current-year losses under paragraph 3(d) … .
Neal Armstrong. Summary of 20 March 2026 Internal T.I. 2025-1061521I7 under s. 96(1)(g).
Income Tax Severed Letters 27 May 2026
This morning's release of six severed letters from the Income Tax Rulings Directorate is now available for your viewing.
Fadali – Tax Court of Canada finds that the s. 296(2.1) requirement on CRA to apply available rebates when assessing HST reduced a late-filing penalty
Derksen J. found that the taxpayer was not entitled to claim ITCs respecting his construction expenses of a new home that he had sold in December 2020 because they were incurred while he was not yet a registrant. However, he could (and, in fact, at a subsequent juncture, did) claim a rebate under s. 257 for the same expenses.
Derksen J. further found that if the taxpayer had filed a rebate application under s. 257 at the time he was assessed in June 2021 to deny those ITCs, he would have been entitled to it. Accordingly, s. 296(2.1) required the CRA to take such a rebate amount into account when assessing the taxpayer before the rebate application had in fact been made. Consequently, having regard to the similar issue in Villa Ste-Rose, the quantum of the late filing penalty assessed against the taxpayer under s. 280.1 (for filing his December 2020 return over a year late) should be reduced accordingly.
Neal Armstrong. Summary of Fadali v. The King, 2026 TCC 86 under ETA s. 123(1) – builder – (f) and s. 296(2.1).
CRA extends the effective date for the taxability of trailing commissions
In its 10 February 2026 version of GST/HST Notice 344 CRA confirm earlier comments made in 22 December 2025 GST/HST Interpretation 246664 that “[a]s a result of … industry developments” it “will enforce the application of the GST/HST to supplies made by dealers on or after July 1, 2026, in exchange for trailing commissions.” In a revised version of the Notice issued on 26 May 2026, CRA changed the effective date, by stating:
The CRA will enforce the application of the GST/HST to:
- these supplies made by dealers on or after January 1, 2028
- any such supplies made before that date where the dealer has treated the supplies as taxable by claiming input tax credits (ITCs) on business inputs attributed to those supplies, with such enforcement applying from the first such supply to which inputs were attributed and related ITCs claimed
The comments in the revised Notice effectively acknowledge that this change will reduce net CRA collections since the mutual fund managers will claim ITCs for the GST/HST charged on the trailing commissions, and their taxability will now generate ITCs to the dealers.
Neal Armstrong. Summary of GST/HST Notice 344, Application of the GST/HST to Mutual Fund Trailing Commissions, 26 May 2026 under s. 123(1) – financial service – (l).