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. [Back to Top] 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 It has been replaced by TPM-07.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". [Back to Top] 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  [Back to Top] News and Other Resources 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
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