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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.


TPM-01 (Archived)

This publication is archived and kept for historical purposes. It has been replaced by TPM-07.


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.


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.


This document provides guidelines on the use of confidential third-party information in the context of transfer pricing audits.


The purpose of this document is to provide a directive concerning requests for contemporaneous documentation.


The purpose of this document is to provide information concerning the bundling of transactions in relation to transfer pricing and non-resident tax.


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.


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.


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.


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".


The CRA released these guidelines for accepting an Accelerated Competent Authority Procedure ("ACAP") request.


This TPM cancels and replaces Transfer Pricing Memorandum TPM-07. The purpose of this memorandum is to provide information about the guidelines for referrals to the Transfer Pricing Review Committee (TPRC) of the CRA regarding possible transfer pricing assessments under paragraphs 247(2)(b) and (d) and penalties under subsection 247(3) of the Income Tax Act.


The purpose of this TPM is to provide an overview of the significant changes made in the 2010 version of the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations and of the CRA's position regarding these changes.


On January 29, 2015 the CRA issued Transfer Pricing Memorandum [TPM-15] regarding the transfer pricing analysis of intra-group services. The memorandum discusses in the first place determining whether a service has actually been provided, and in the second place, assuming there has been a service, what elements should be considered in a transfer pricing analysis. The memorandum touches on duplicate and shareholder costs among others, and regarding the transfer pricing analysis, touches on direct and indirect charge methods, specifying that different allocation keys may be appropriate for different services when applying an indirect charge method. Other topics covered include situations where it may be necessary to break out the charges included in a management fee, including cases where individual items may be non-deductible for Canadian tax purposes, or where additional taxes may be caused.


On January 29, 2015 the CRA issued Transfer Pricing Memorandum [TPM-16] regarding the role of multiple year data in transfer pricing analyses. The CRA analyses both the use of multiple year data for comparable entities, as well as the use of statistical methods, concluding that while looking at multiple years of data may be useful in understanding the relevant economic characteristics of the comparable transactions, transfer pricing results should be determined based on the results of a single year of data. An appendix includes further detail on the appropriate uses of statistical tools in transfer pricing.


On March 2, 2016 the CRA issued Transfer Pricing Memorandum 17, in order to provide guidance on the impact and treatment of government assistance in the context of a transfer pricing analysis. The policy on government assistance applies for the purpose of determining transfer prices. The memorandum includes guidance as well as examples.


Canadian Budget Implements CbC Reporting

The Canadian budget for the 2016-17 fiscal year, described in a document issued on March 22, 2016, outlines several actions in line with the OECD’s recommendations on Base Erosion and Profit Shifting (BEPS), including new legislation to strengthen transfer pricing documentation by introducing country-by-country reporting for large multinational enterprises, revised international guidance on transfer pricing, and the spontaneous exchange with other tax administrations of tax rulings that could give rise to BEPS concerns, among other actions.
March 2016

CRA Canada Customs Agency Memorandum

The Canada Border Services Agency issued Memorandum D13-4-5 entitled "Transaction Value Method for Related Persons." It explains the agency's policy on the treatment of downward transfer price adjustments for sales between related parties that use the transaction value method for determining value for customs purposes.
September 17, 2015

CRA Advance Pricing Arrangement Program Report - 2014-2015

This year’s APA report is the fourteenth of its kind issued by the CRA on the APA program. The report is targeted to taxpayers, tax representatives, and international tax administrations. The key objectives of the report include: Enhancing awareness of the CRA's APA program; Notifying readers of changes to the APA program; Providing an operational status update; and, Identifying issues that may impact the APA program in future years The report places a heavy emphasis on statistical analysis and quantitative data with a particular aim of providing insight to the approaches taken by the CRA and its treaty partners on difficult transfer pricing issues.
August 2015

CRA Mutual Agreement Procedure Program Report - 2014-2015

The report presents insights about the types of issues that may or may not be successfully resolved through the mutual agreement procedure (MAP) program.
August 2015

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


IRS Announces Position on Unilateral APA Applications Involving Maquiladoras

On October 14, 2016 the IRS issued press release IR-2016-133 stating that U.S. taxpayers with maquiladora operations in Mexico will not be exposed to double taxation if they enter into a unilateral advance pricing agreement with the Mexican tax authorities under terms that have been discussed between the U.S. and Mexican competent authorities. Qualifying taxpayers may elect to apply a transfer pricing framework that the U.S. and Mexican authorities have previously agreed will produce arm’s length results. The Mexican tax authority will directly notify qualifying Mexican taxpayers, and provide details on the steps the taxpayers must take regarding their pending unilateral APA requests.

New rules for APAs Include Functional Analysis and Visit

On July 14, 2016, a modification to rule 2.12.8 was published in Mexico’s Federal Register (Diario Oficial de la Federación) as part of the Third Resolution of Amendments to the Miscellaneous Tax Resolution for 2016 and the corresponding appendices. The modified rule establishes that taxpayers who wish to request an advance pricing agreement (APA) under article 34-A of the Federal Tax Code should do so by submitting form 102/CFF “Transfer Pricing Consultations”, included in Appendix 1-A to the Third Resolution. Additionally, the modified rule establishes that the tax authorities may undertake a functional analysis which may be carried out in the interested party’s offices or any area where relevant activities are carried out.

An excerpt of the DOF publication including the modified rule 2.12.8 and the corresponding appendix are provided in the attached document.

Mexico Adopts BEPS Reporting Requirements

Mexico adopted the three-tier transfer pricing reporting requirement, as outlined in recent publications from the OECD relating to the project on Base Erosion and Profit Shifting (BEPS). The new requirement is included in Article 76-A of the Mexican Income Tax Law, and outlines 3 levels of transfer pricing documentation; the master file, local file, and country by country reporting, which will be submitted to the tax authority by December 31 of the year following the tax year in question (the first deadline will be December 31, 2017, referring to the 2016 tax year). (The Spanish-language excerpt from the law is here, the link above is to an unofficial English translation by ECS.)

Articles 181 and 182 of the Mexican Income Tax Law

The above link is to an unofficial ECS English translation of articles 181 and 182 of the Mexican Income Tax Law, which are the articles that deal specifically with maquila companies. There are two ways to determine a maquila’s taxable profit – 6.9% of the assets used in the operation or 6.5% of the costs and expenses attributable to the operation. The articles include additional detail on how the assets and costs and expenses should be determined.

Ley del Impuesto Sobre la Renta (Mexican Income Tax Law)

Relevant Excerpts from the Mexican Income Tax Law as published in the Official Gazette on December 11, 2013 regarding Transfer Pricing. Unofficial translation by ECS.

Appendices 16 and 16-A to the Resolución Miscelánea Fiscal para 2008 (in Spanish)

Mexico published transfer pricing financial reporting requirements, which require taxpayers to disclose additional transfer pricing and related information on their audit reports. Included is a transfer pricing questionnaire to be completed by a Registered Public Accountant ("RPA").

OECD Country Profile for Mexico

For professional transfer pricing consulting services, contact Economic Consulting Services at 202-466-7720.
Or email jerrie.mirga@economic-consulting.com