Transfer Pricing
Resources for Canada
Government Links
CRA Transfer Pricing
Regulations and Information Circulars
CRA Transfer Pricing
Memoranda
Relevant Tax Court Cases
News and Other Resources
Government Links
Canada Revenue Agency's
(CRA) Transfer Pricing Page
CRA Transfer Pricing Regulations and Information Circulars
Section 247
of the Income Tax Act
The transfer pricing
rules are set out in section 247 of the Income Tax Act. These
provisions require that Canadian taxpayers document non-arm's-length
transactions with non-residents and use arm's length transfer prices.
Permits the CRA to adjust a Canadian taxpayer's transfer prices or cost
allocations where the transfer prices or cost allocations do not reflect
arm’s length pricing.
Information Circular 87-2R,
September 27,1999
Guidance with respect to the transfer pricing rules set out in section 247 of the Income
Tax Act which received Royal Assent on 18 June 1998.
Information Circular 94-4R, March 16, 2001
This circular cancels and replaces Information Circular 94-4,
dated December 30, 1994. This Information Circular provides
comprehensive guidance on Advance Pricing Arrangements. The
Information Circular has been revised to reflect improvements the Canada
Revenue Agency is making in program administration as a result of an
extensive consultation process involving affected taxpayers, tax executives,
and tax specialists.
Information Circular 06-1, October 5, 2006
Specifies the reasons that may cause different
transfer pricing and customs values for the same goods because of different
valuation methods used by the CRA and the Canada Border Services Agency.
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CRA Transfer Pricing Memoranda
TPM-01 (Archived)
This publication is archived and kept for historical
purposes. It has been replaced by
TPM-07.
TPM-02
This document explains how to apply the repatriation policy
to international transfer pricing under subsection 247(2) of the Income Tax
Act (the Act) and Part XIII tax.
TPM-03
This document provides guidance on dealing with situations
that involve downward transfer pricing adjustments. These situations may
occur during an audit or when a taxpayer requests an adjustment from the
local tax services office.
TPM-04
This document provides guidelines on the use of confidential
third-party information in the context of transfer pricing audits.
TPM-05
The purpose of this document is to provide a directive
concerning requests for contemporaneous documentation.
TPM-06
The purpose of this document is to provide information
concerning the bundling of transactions in relation to transfer pricing and
non-resident tax.
TPM-07
This document cancels and replaces
TPM-01. This
document provides an update to the guidelines for referrals to the
International Tax Directorate and to the Transfer Pricing Review Committee
regarding possible assessments under paragraph 247(2)(b), penalties under
subsection 247(3), and Qualifying Cost Contribution Arrangements under
subsection 247(1) of the Income Tax Act.
TPM-08
The purpose of this memorandum is to provide guidelines on
how to proceed with cases under audit concerning fixed base or permanent
establishment (PE) determinations under Canadian income tax conventions, to
provide a framework for general PE determinations, to raise some other
considerations and to provide an explanation of the application of the
treaty-based waiver guidelines to cases requiring a PE determination.
TPM-09
The primary purpose of this memorandum is to provide guidance
as to what constitutes reasonable efforts to determine and use arm's length
transfer prices or arm's length allocations.
TPM-10 (Archived)
This publication is archived and kept for historical
purposes. It has been replaced by
TPM-11.
TPM-11
This document cancels and replaces
TPM-10.
The purpose of
this memorandum is to convey the policy regarding an advance pricing
arrangement (APA) request to cover prior taxation years, sometimes referred
to as an APA "rollback".
TPM-12
The CRA released these guidelines for accepting an
Accelerated Competent Authority Procedure ("ACAP") request.
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Relevant Tax Court Cases
GlaxoSmithKline Inc. V. The Queen
The CRA succeeded in its bid to
apply the comparable uncontrolled price (CUP) method and adjust the transfer
price on the basis that the GlaxoSmithKline Canadian subsidiary paid a
higher price to its related party vendor for an active ingredient than would
have been reasonable if the companies were dealing at arm’s length. The
Canadian subsidiary announced on June 27, 2008 that it plans to appeal the
ruling.
May 30, 2008
General
Electric Capital Canada Inc. V. The Queen
This appeal relates to the CRA's
denial of deductions for guarantee fees paid to the foreign parent company.
The CRA had initially sought to utilize Canada’s transfer pricing
recharacterization rules to adjust the guarantee fee amount, but this
argument was abandoned. Before this argument was dropped, the case
represented the largest transfer pricing adjustment ever before the Tax
Court of Canada at about $C 136.4 million.
April 30, 2008
Avotus Corporation V. The Queen
The Tax Court of Canada upheld the
right of Avotus Corporation to deduct from its Canadian income losses
incurred by its subsidiary in Puerto Rico. The Tax Court found that the
Puerto Rican subsidiary was Avotus’s agent under a validly executed agency
agreement, rejecting the CRA’s claim that the written agreement was
unacceptable because the subsidiary’s conduct was inconsistent with that of
an agent.
November 21, 2006
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News and Other Resources
CRA
Mutual Agreement Procedure Program Report - 2008-2009
The report presents insights about the types of issues
that may or may not be successfully resolved through the mutual agreement
procedure (MAP) program.
Summer 2009
Canada
Revenue Agency Posts New T106 Form - Information Return of Non-Arm's Length
Transactions with Non-Residents
New form includes a section that covers derivatives.
December 22, 2008
Advisory Panel Publishes Its Recommendations to the Canadian Minister of
Finance
The Minister of Finance established the Advisory Panel on
Canada's System of International Taxation in November 2007. The
Panel’s mandate was to "recommend ways to improve the competitiveness,
efficiency and fairness of Canada’s system of international taxation,
minimize compliance costs, and facilitate administration and enforcement by
the CRA." This is the final report detailing the Panel's views and
recommendations.
December 10, 2008
CRA
APA Program Report - 2007-2008
This report describes the purpose
of the APA Program, its history, and current events that are shaping its
future. Emphasis is placed on statistical analysis in order to make the
Program more transparent as well as to provide insight as to the approaches
taken by the CRA and its treaty partners on difficult transfer pricing
issues.
November 1, 2008
CRA
Mutual Agreement Procedure Program Report - 2007-2008
The report presents insights about the types of issues
that may or may not be successfully resolved through the mutual agreement
procedure (MAP) program.
Summer 2008
Canada Enacts Important Updates to the Canada-U.S. Tax Treaty
A protocol to the Canada-US tax treaty launched a new
regime that will encourage companies with related party borrowers and
lenders to circulate cash between the two countries. Intercompany loans
were previously inhibited by a 10% withholding rate on the borrower’s
interest payments, this tax will go to zero over the first three years
that the protocol is in effect.
Signed September 21, 2007
Income Tax Technical News
This bulletin provides five examples from the CRA to
illustrate its interpretation of the foreign affiliate anti-avoidance rule
in paragraph 95(6)(b) of the Income Tax Act.
July 27, 2007
