A new era for the Canadian GAAR

Dec 11, 2023 1 MIN READ
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Pooja Mihailovich

Partner, Tax, Toronto

Leandra Gupta

Associate, Tax, Toronto

Canada’s general anti-avoidance rule (GAAR) operates to negate tax benefits arising from “abusive” tax avoidance transactions. These are transactions that technically satisfy the requirements of the law, but are found to be contrary to the spirit or underlying policy of the legislation or its specific provisions. Since its introduction more than 30 years ago, the GAAR has operated effectively in preventing abusive tax avoidance. Canadian courts have crafted a rigorous analytical framework for the application of the GAAR and have continually sought to balance the need for certainty in tax planning against the desire to combat abuse.

In large part, the existing GAAR framework has maintained this balance. The Canadian tax authority has lost approximately 24 cases to date, despite having assessed taxpayers under the GAAR in more than 1,300 instances…

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