Methanex prevails in Privy Council dispute in Trinidad and Tobago – Bloomberg Tax Methanex prevails in Privy Council dispute in Trinidad and Tobago – Bloomberg Tax

A decision by the U.K. Privy Council regarding sequential dividend payments demonstrates the importance of commercial practice and well understood corporate law concepts when interpreting tax statutes and treaties, says partner David Wilson, Tax, and associates Sebastien Duckett and Joshua Lasry, Tax, in their article published by Bloomberg Tax.

The case involved sequential dividends paid by an operating company through a chain of holding companies to the ultimate parent in Canada. At issue was the applicability of a Trinidad and Tobago domestic anti-avoidance rule that mirrors similar rules in the domestic tax regimes of other Caribbean nations, and of broader application, the proper interpretation of the Caribbean Community Tax Treaty.

The Trinidad Board of Inland Revenue (BIR) recharacterized the dividends paid by the operating subsidiary in Trinidad as being paid “in substance” directly from the operating subsidiary to the ultimate parent in Canada, and it applied withholding tax accordingly. The BIR invoked a domestic anti-avoidance rule and raised several treaty interpretation arguments to support its position. In a unanimous decision, the Privy Council allowed the taxpayer’s appeal, overturning lower court decisions in favour of the BIR.

At each court level, the decisions in the Methanex case recognized that tax-driven structuring was not itself an issue. The issue instead was whether the specific dividends paid through this chain of companies could be recharacterized into dividends paid from an operating company directly to its ultimate parent for purposes of determining if withholding tax applied. Departing from both lower courts on this question, the Privy Council held they could not be so recharacterized and that the well-established corporate law principles as to what constitutes a valid dividend must be respected, both in the interpretation of the domestic anti-avoidance rule and for tax treaty purposes.

This case is an important reminder that purposive interpretation cannot be used to read terms or restrictions into a treaty that the treaty signatories did not themselves choose to include. This is especially true when there is no evidence to suggest the parties intended otherwise.

Read the full article posted by Bloomberg Tax on August 13, 2025.

You can also read the full Osler Update: Taxpayer wins U.K. Privy Council CARICOM Tax Treaty case.