Yes, the Luxembourg example.
You're absolutely right. If it's determined that one of the principal purposes, in that example, for using a Luxembourg holding company, is to invest into Canada, the principal purpose test turns off treaty benefits under the Canada-Luxembourg tax treaty. For dividends, Canada would impose a 25% withholding-tax rate on dividends to Luxembourg. Article 7(4) says that even if we're applying the principal purpose test, countries like Canada are nevertheless allowed to apply whatever withholding tax rate would be reasonable in the circumstances, rather than applying our full 25% withholding-tax rate.
If your ultimate investors in this example could have been entitled to either a 5% or 15% rate, it would be reasonable in the circumstances for the CRA to apply either a 5% or a 15% withholding rate, rather than the 25% withholding rate, which is what I think we have under Bill C-82.