• About
  • Offices
  • Careers
  • News
  • Students
  • Alumni
  • Payments
  • EN | FR
Background Image
Bennett Jones Logo
  • People
  • Expertise
  • Knowledge
  • Search
  • FR Menu
  • Search Mobile
A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
View all
Practices
Corporate Litigation Regulatory Tax View all
Industries
Energy Infrastructure Mining Private Equity & Investment Funds View all
Advisory
Crisis & Risk Management Public Policy
View Client Work
International Experience
Insights News Events Subscribe
Arbitration Angle Artificial Intelligence Insights Business Law Talks Podcast Class Actions: Looking Forward Class Action Quick Takes
Economic Outlook New Energy Economy Series Quarterly Fintech Insights Quarterly M&A Insights Sustainability & the CIO
People
Offices
About
Practices
Industries
Advisory Services
Client Work
Insights
News
Events
Careers
Law Students
Alumni
Payments
Search
Subscribe

Stay informed on the latest business and legal insights and events.

LinkedIn LinkedIn Twitter Twitter Vimeo Vimeo
 
Blog

Supreme Court of Canada to Hear Tax Rectification Case

November 19, 2015

On November 19, 2015, the Supreme Court of Canada granted leave to appeal in Canada (A.G.) v. Groupe Jean Coutu (PJC) inc., 2015 QCCA 838, which addresses the question of when rectification will be granted in the tax context.

Le Groupe Jean Coutu (PJC) inc. acquired an American pharmacy chain in 2004. It faced a problem with the accounting presentation of this acquisition due to fluctuations in the exchange rate. In February 2005, in an attempt to find a tax-neutral solution to the problem, it carried out a series of transactions, the net effect of which was to transform the net U.S. investment into a net debt. The anticipated and agreed to tax consequences of the transactions were set out in the documentation formalizing the transactions.

After an audit for the taxation years 2005 to 2007, CRA advised Jean Coutu the transactions resulted in $2.2M in additional taxes for the years in question. Thus, the transactions as documented addressed the currency hedge problem, but created unanticipated tax consequences. Jean Coutu filed a motion in Québec Superior Court for an order rectifying the transactions. The Crown objected to the motion, arguing Jean Coutu did not meet the test for rectification.

The Québec Court of Appeal overturned the Superior Court decision granting Jean Coutu's motion for rectification. The Court reviewed the Supreme Court decision in AES & Riopel., 2013 SCC 65, confirming rectification is available to correct errors in giving effect to a transaction with intended tax consequences, but is not a general license to reverse or correct unintended tax consequences of commercial dealings.

The Court held that the transactions at issue were not restructuring transactions seeking to defer or avoid foreseen tax (as in AES & Riopel), but a series of offsetting loans meant to neutralize the effect on the balance sheet of the variation in the value of the American investment. The transactions thus achieved their intended purpose, and the general intention that the transactions be "tax neutral" was insufficient to justify rectification.

By granting leave to appeal in this case, the Supreme Court will hopefully provide clarification on the question of what "intention" is required to be proven in tax rectification cases. While prior cases have suggested that a general intention to enter into a "tax neutral" transaction is sufficient, more recent decisions have suggested that a more specific intent is required. If the Court of Appeal decision is upheld, rectification in the tax context will only be permitted where a transaction is purposefully structured to avoid specific, identifiable tax consequences, and not merely structured to be "tax neutral". If the Court of Appeal is correct, taxpayers and tax advisors will have to be even more diligent in considering the potential tax consequences of any transaction.

Please note that this publication presents an overview of notable legal trends and related updates. It is intended for informational purposes and not as a replacement for detailed legal advice. If you need guidance tailored to your specific circumstances, please contact one of the authors to explore how we can help you navigate your legal needs.

For permission to republish this or any other publication, contact Amrita Kochhar at kochhara@bennettjones.com.

Download PDF

Related Links

  • Insights
  • Media
  • Subscribe

Recent Posts

Blog

Upending the Ground Rules: Proposed Major Overhaul [...]

May 08, 2025
       

Blog

Government of Alberta Proposes Significant Changes [...]

May 06, 2025
       

Blog

What Does the SPAC IPO Rebound Mean for Cross-Border Deals?

May 05, 2025
       

Blog

Q&A on Protecting Family Enterprises Through Collaborative Family Law

April 29, 2025
       

Blog

CSA Announces Pause on Climate-Related and Diversity-Related [...]

April 28, 2025
       
Bennett Jones Centennial Footer
Bennett Jones Centennial Footer
About
  • Leadership
  • Diversity
  • Community
  • Innovation
  • Security
Offices
  • Calgary
  • Edmonton
  • Montréal
  • Ottawa
  • Toronto
  • Vancouver
  • New York
Connect
  • Insights
  • News
  • Events
  • Careers
  • Students
  • Alumni
Subscribe

Stay informed on the latest business and legal insights and events.

LinkedIn LinkedIn Twitter Twitter Vimeo Vimeo
© Bennett Jones LLP 2025. All rights reserved.
  • Privacy Policy
  • Disclaimer
  • Terms of Use
Logo Bennett Jones