Making principal purpose tests more efficient: Gowling WLG and Blue J join forces on innovative tax tool

09 März 2021

Gowling WLG and Blue J, the leading provider of analytics for tax positions, have collaborated on an advanced search tool for worldwide legal resources related to the interpretation of "principal purpose" in domestic legislation and treaties. The tool is the latest addition to the Canadian version of Blue J Tax and is available for immediate use by subscribers to the platform across the country.

"Collaborating on this feature with Blue J supports our collective objective of making principal purpose test decisions and other resources more transparent and actionable for Canadian business," said John Sorensen, a partner and co-leader of Gowling WLG's Tax Dispute Resolution team.

"The combination of Gowling WLG's tax expertise and practical experience and Blue J's proprietary methodology have led to an innovative tool that simplifies advice regarding the principal purpose test," adds Laura Gheorghiu, a partner in Gowling WLG's National Tax Practice Group.

Since entering into force in December 2019, the Multilateral Instrument (MLI) has modified a significant number of Canadian tax treaties. The introduction of a new anti-avoidance rule, in the form of the Principal Purpose Test (PPT) in Article 7 of the MLI, has raised potential uncertainty regarding access to tax treaty benefits. Furthermore, the courts and the Canada Revenue Agency (CRA) have yet to provide definitive guidance as to how the PPT may be satisfied.

The new PPT module enables users to quickly pinpoint documents that are relevant to analyzing the application of Article 7(1) of the MLI. This advanced search function includes commentary from the Organisation for Economic Co-operation and Development and the CRA with respect to treaty shopping, as well as related Canadian case law and revenue rulings and interpretations that shed light on the interpretation of principal purpose in the context of the Income Tax Act (ITA). Additionally, the module can be used to identify relevant case law, rulings and interpretations as they relate to other instances of "principle purpose tests" in the ITA.

"Gowling WLG's tax practice is consistently recognized as a leading provider of tax law services in Canada, with significant international tax expertise," says Benjamin Alarie, co-founder and CEO of Blue J. "We're excited to provide this solution for expert tax professionals on our updated Blue J Tax platform, and we look forward to helping streamline the analysis of this complex area for tax professionals across Canada."

The new tools are a critical investment for Blue J, as the company continues to expand its Canadian operations with new platform updates.

About Blue J

Blue J uses machine learning and artificial intelligence to make the law more transparent and accessible. The company's technology saves users hours of time and offers confident answers in challenging circumstances. While the company's initial focus is on tax and employment law, the technology is versatile and is being extended to cover other areas of law in the U.S., Canada, and around the world.