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September 25, 2007 No. 2007-05
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CRA Publishes Policy on APA Rollbacks The Canada Revenue Agency has published its policy on requests to have advance pricing arrangements (APA) apply to prior tax years. The new policy, published in Transfer Pricing Memorandum TPM-10, may ultimately diminish the effectiveness of the APA rollback program. Background An APA is an arrangement between a multinational enterprise and one or more tax authorities confirming, in advance, an appropriate transfer pricing methodology to be applied to one or more specific intercompany transactions for a specified term. An "APA rollback" is the application of the transfer pricing methodology agreed upon in the APA to years before the beginning of the APA. Criteria for accepting an APA rollback · a request for contemporaneous documentation has not been issued by a tax services office (TSO) · the facts and circumstances are the same · the foreign tax administration and the relevant TSO have both agreed to accept the APA rollback request · appropriate waivers have been filed. TSO requests for contemporaneous documentation If a taxpayer's request for an APA rollback is not
accepted by the CRA, a request for contemporaneous documentation may be
issued by the TSO for the transactions formerly proposed to be covered in the
APA rollback period. KPMG observations Before this new policy, rollbacks were often used by taxpayers and their advisers in files where either an ongoing transfer pricing audit had become adversarial or the CRA position's had become entrenched. This new policy effectively closes this avenue and shifts the balance of power to the CRA audit. As a result, the policy may ultimately diminish the effectiveness of the APA rollback program. We can help
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Information is current to September 18, 2007. The information contained in this Transfer Pricing 60 Seconds is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG’s National Tax Centre at 416.777.8500. KPMG LLP, a Canadian limited liability partnership established under the laws of Ontario, is the Canadian member firm of KPMG, a global network of professional firms providing Audit, Tax, and Advisory services. We operate in 144 countries and have more than 104,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International, a Swiss cooperative. KPMG International provides no client services. KPMG's Canadian Web site is located at www.kpmg.ca © 2007 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.
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