Methanex Trinidad (Titan) Unlimited (Appellant) v The Board of Inland Revenue (Respondent) (Trinidad and Tobago)
Case ID: JCPC 2022/0054
Jurisdiction: Court of Appeal of the Republic of Trinidad and Tobago
Case summary
Issue
Should dividends paid by the appellant to its sole shareholder, incorporated in Barbados, be subject to withholding tax at a rate of 5% if identical amounts were subsequently transferred, ultimately, to a parent company incorporated in Canada?
Facts
In the tax year 2007, the appellant ("Methanex Trinidad") paid US$85.4 million in dividends to accounts held in the name of its sole shareholder, Methanex Trinidad Holdings Limited ("Methanex Barbados"), but for which signatories were officers of Methanex Corporation ("Methanex Corp"). Shortly after each payment, Methanex Barbados declared and paid dividends to its sole shareholder ("Methanex Cayman") in identical amounts. Methanex Cayman comingled the funds received as dividends with other funds and used those funds for a variety of purposes, including the payment of dividends to its sole shareholder, Methanex Corp, a Canadian public company and the ultimate parent company of the group.
Methanex Trinidad, Methanex Barbados and Methanex Cayman were incorporated in Trinidad and Tobago, Barbados and the Cayman Islands, respectively. Both Methanex Barbados’ and Methanex Cayman's sole businesses were that of holding companies.
Trinidad and Tobago and Barbados are each member states of the Agreement among the Governments of the Member States of the Caribbean Community for the Avoidance of Double Taxation (the "CARICOM Treaty"). As Methanex Trinidad and Methanex Barbados each understood themselves to be resident in a CARICOM Member State, Methanex Trinidad relied on the provisions of the CARICOM Treaty for relief from withholding tax on the dividends.
The respondent (the "Board") assessed Methanex Trinidad to additional withholding tax in the sum of $28.4m. This assessment arose by the Board's decision that the dividend payments to Methanex Barbados were "artificial and fictitious", under section 67 of the Income Tax Act. The Board deemed the dividend payments to have been made to Methanex Corp, and decided that they were thus subject to withholding tax at a rate of 5% pursuant to the Trinidad and Tobago-Canada Tax Treaty.
The Tax Appeal Board confirmed the Board's assessment. The Court of Appeal dismissed Methanex Trinidad's appeal and granted final leave to appeal as of right to the JCPC.
Parties
Appellant
Methanex Trinidad (Titan) Unlimited
Respondent
The Board of Inland Revenue
Appeal
Justices
Lord Lloyd-Jones, Lord Hamblen, Lady Rose, Lord Richards, Lady Simler
Hearing start date
16 April 2024
Hearing finish date
16 April 2024
| Watch hearing | ||
|---|---|---|
| 16 April 2024 | Morning session | Afternoon session |