Transfer Pricing News - 2011 Report Card on CRA's Mutual Agreement Program
August 9, 2011
The CRA’s 2010-2011 Mutual Agreement Procedure Program Report shows that interest in the program continues to be strong.
Global Transfer Pricing Review - 2011 Edition
April 4, 2011
Globally, transfer pricing is a hot button issue for regulators and companies alike. As globalization widens the reach and ambition of multinationals, CFOs and tax directors face significant new risks in tax regimes with different rules and expanding requirements.
A World in Transition: Managing the Transfer Pricing Implications of Complex Supply Chains
May 31, 2011
Transfer pricing around corporate supply chains has become increasingly complex and closely scrutinized in recent years.
Resolving Canada-U.S. Double Tax Disputes through Arbitration – New Guidance
December 1, 2010
The Canada Revenue Agency (CRA) and Internal Revenue Service (IRS) recently released details on the new procedure to be followed by the Canadian and U.S. competent authorities for cases proceeding to arbitration under the Canada-U.S. tax treaty.
Resolving Canada-U.S. Double Tax Disputes through Arbitration – New Guidance
December 1, 2010
The Canada Revenue Agency (CRA) and Internal Revenue Service (IRS) recently released details on the new procedure to be followed by the Canadian and U.S. competent authorities for cases proceeding to arbitration under the Canada-U.S. tax treaty.
GlaxoSmithKline Inc. — Taxpayer Wins But at What Price?
August 5, 2010
The Federal Court of Appeal (FCA) has reversed the Tax Court of Canada (TCC) decision in GlaxoSmithKline Inc. v. The Queen.
Transfer Pricing News — Completed Advance Pricing Arrangements on the Rise
July 23 2010
The CRA’s 2009-2010 Advance Pricing Arrangement (APA) Program Report shows that interest in the program continues to be strong.
CRA Reports Growing Interest in Advance Pricing Agreements
January 22, 2010
A CRA program report says that the CRA concluded 10 APAs in 2008-09, up from eight completed APAs in 2007-08
GE Capital - Court Accepts Guarantee Fees in Landmark Transfer Pricing Case
December 9, 2009
The Tax Court of Canada recently ruled in the taxpayer's favour in General Electric Capital Canada Inc. , vacating the CRA's assessments that denied the taxpayer about $136 million in deductions for guarantee fees.
OECD Proposes to Fine-tune Transfer Pricing Guidelines
September 17, 2009
The OECD issued proposed revisions to the widely referenced Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (“OECD Guidelines”) on September 9, 2009.
Time Limits for Waivers and Transfer Pricing Reassessments Now in Synch
April 21, 2009
If your company is involved in an ongoing transfer pricing audit, you should be aware of a welcome recent tax law change to harmonize the time limit during which you can file a waiver of the seven-year time limitation for reassessments arising from transfer pricing transactions.
Advisory Panel Calls for Changes to Transfer Pricing System
December 22, 2008
A special subcommittee of high-profile transfer pricing specialists has made more than 20 recommendations for improving the administration of Canada’s transfer pricing rules.
CRA to Speed Up Accelerated Competent Authority Procedure
December 19, 2008
The CRA recently released new guidelines for accepting an Accelerated Competent Authority Procedure (ACAP) request. The ACAP allows taxpayers who have made a mutual agreement procedure (MAP) request to ask the CRA to simultaneously negotiate and settle the same issues for taxation years after the years to which the MAP request relates. These new guidelines significantly improve the ACAP program's usefulness for taxpayers.
CRA Program Report Says Completed APAs Continue to Decline
November 25, 2008
The Canada Revenue Agency’s 2007-2008 Advance Pricing Arrangement Program Report shows that the CRA concluded only eight APAs in 2007-08, including seven bilateral and one unilateral APAs. This total is down from nine completed APAs in 2006-07. While the CRA’s APA completion rate continues to decline, its inventory of pending cases continues to grow, rising to 61 pending cases at the end of this year from 45 at the end of 2005-2006.
CRA Clarifies — No Rollback for Unilateral APAs
November 10, 2008
The Canada Revenue Agency (CRA) recently revised its Transfer Pricing Memorandum on advance pricing arrangement (APA) rollbacks. The revised memorandum clarifies that a taxpayer cannot apply a unilateral APA to prior taxation years, i.e., years before the request for the APA.
Transfer Pricing Aspects of Business Restructurings — OECD to Revise Guidelines
October 23, 2008
The Organisation for Economic Co-operation and Development (OECD) recently released a series of draft issues notes on the transfer pricing aspects of business restructurings (the Discussion Draft).
CRA’s 2008 Report Card on Mutual Agreement Program
August 20, 2008
The Canada Revenue Agency (CRA) recently released its Mutual Agreement Procedure Program Report for 2007-2008. This report may interest any taxpayer with cross-border financial dealings as it offers valuable insights about the types of issues that may or may not be successfully resolved through the mutual agreement procedure (MAP) program.
GlaxoSmithKline - Taxpayer Appeals Landmark Transfer Pricing Case
July 4, 2008
The taxpayer in GlaxoSmithKline has appealed a landmark tax court decision involving the price paid by a Canadian subsidiary of a pharmaceutical company to a related non-resident company for an active ingredient used in the manufacture of a prescription drug.
CRA Fails in Bid to Subvert Solicitor-Client Privilege
June 17, 2008
The Tax Court of Canada (TCC) recently issued an order in the GE Capital case, rejecting a motion to compel the company to reveal advice that was subject to solicitor-client privilege.
GlaxoSmithKline - Tax Court Prescribes Bitter Pill in Transfer Pricing Case
June 13, 2008
The Tax Court of Canada (TCC) recently issued its long-awaited decision in GlaxoSmithKline (2008 TCC 324), which arguably constitutes the most important transfer pricing decision in Canada to date. This case involves the transfer price paid by a Canadian subsidiary of a pharmaceutical company to a related non-resident company for an active ingredient used in the manufacture of a prescription drug. The total adjustment proposed by the CRA for the relevant taxation years was almost $51.5 million.
2008 IFA Roundtable - CRA Officials Shed Light on Transfer Pricing Issues
May 20, 2008
Officials with the Canada Revenue Agency (CRA) answered questions regarding its administration of Canada's transfer pricing rules at a recent roundtable presentation. The CRA's responded to questions on Advance Pricing Arrangement rollbacks, the independence of the CRA's Appeals division, and examples of cases where the CRA has sought transfer pricing re-characterizations.
OECD Proposes Policy Change on Profit-Based Transfer Pricing Methods
February 13, 2008
The Organisation for Economic Co-operation and Development (OECD) recently released a series of draft issues notes on the use of transactional profit methods in transfer pricing (the Discussion Draft). The OECD is asking for public comments on the Discussion Draft and its recommendations. The results of this consultation will be used as the basis of a revised draft of the relevant parts of the OECD transfer pricing guidelines (the TP Guidelines).
CRA Program Report Shows Decline in Completed APAs
October 25, 2007
The Canada Revenue Agency’s 2006-2007 Advance Pricing Arrangement (APA) Program Report shows that the CRA concluded only nine APAs in 2006-2007, including six bilateral and three unilateral APAs. This total is down from 10 completed APAs in 2005-2006 and from 17 in each of 2003-2004 and 2004-2005. With 45 cases pending, the APA program ended the 2006-2007 year with its highest inventory since the program’s inception.
Transfer Pricing Highlights of New Canada-U.S. Tax Treaty Protocol
October 3, 2007
Canada’s Minister of Finance and the U.S. Treasury Secretary signed a new protocol to the Canada-U.S. tax treaty on September 21, 2007, which includes several changes that may affect transfer pricing. The main features of the protocol affecting transfer pricing are highlighted below.
CRA Publishes Policy on APA Rollbacks
September 25, 2007
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.
Transfer Pricing Dispute on Guarantee Fee Going to Court
April 25, 2007
A case recently appealed to the Tax Court of Canada (TCC) represents the largest transfer pricing adjustments ever before the TCC at about $136.4 million. The taxpayer in this case is appealing the Canada Revenue Agency's (CRA) denial of deductions for guarantee fees the Canadian taxpayer paid to its non-resident parent company. This case confirms that the CRA is actively examining financial transactions, and guarantee fees charged by foreign entities in particular.
CRA Steps Up International Tax Audits
March 5, 2007
A recent report of the Auditor General (AG) indicates that the CRA has become increasingly concerned with the tax risks associated with international transactions. Although the AG found that the CRA is better able to identify potential non-compliance with the tax rules on international transactions, the CRA still needs to improve in several areas.
CRA Targets Small Business in Transfer Pricing Case
March 5, 2007
A transfer pricing case at the Tax Court of Canada was recently settled in the taxpayer’s favour by both parties’ consent. In this case, the CRA had challenged a Canadian company’s transfer prices for a tangible product involving a related U.S. entity. The relatively small amount involved in this case may indicate that the CRA is not limiting its transfer pricing targets to large companies making transactions involving larger amounts.
CRA Report Card on Mutual Agreement Program
February 19, 2007
The Canada Revenue Agency (CRA) recently released its Mutual Agreement Procedure Program Report for 2005-2006. This report may interest any taxpayer with cross-border financial dealings as it offers valuable insights about the types of issues that may or may not be successfully resolved through the mutual agreement procedure (MAP) program.
Valuation for Transfer Pricing and Customs — What’s the Difference?
November 21, 2006
The Canada Revenue Agency (CRA) recently clarified why a transfer price used for income tax purposes cannot be used for customs duty purposes. The CRA’s new information circular on this issue details the factors that may cause divergent transfer pricing and customs values for the same goods because of different valuation methods used by the CRA and the Canada Border Services Agency (CBSA).
CRA Clarifies “Reasonable Efforts” to Determine Arm’s Length Transfer Prices
November 20, 2006
The Canada Revenue Agency (CRA) recently released guidance to help taxpayers determine whether they have made “reasonable efforts” to determine and use arm’s length transfer prices or arm’s length allocations. The guidance may also apply to reasonable efforts to match the contributions of participants to their respective expected benefits under a qualifying cost contribution arrangement.
Update on Transfer Pricing Cases Before the Courts
May 31, 2006
A review of recently filed or settled tax court cases involving transfer pricing issues shows that the CRA is challenging a wide variety of taxpayers and transactions and that the materiality of the amounts involved does not always determine the direction that a given case will take. These cases, which are outlined below, include a case in which a pharmaceutical company is being assessed $51 million in transfer pricing adjustments, and a second case involving a financial services company, which was recently settled by consent to judgment for $1.5 million or 30% of the original adjustment.
CRA Provides Update on Referrals to Transfer Pricing Review Committee
March 24, 2006
The CRA recently provided an update on the status of the 16 files referred to the Transfer Pricing Review Committee (TPRC) regarding the potential application of transfer pricing recharacterization rules. The CRA’s statistics show the types of transactions that are attracting the attention of the TPRC.
CRA Reports on Cases Resolved Through Mutual Agreement Procedure Program
March 14, 2006
The Canada Revenue Agency (CRA) recently released its "CRA Mutual Agreement Procedure (MAP) Program Report" for 2004-2005. The MAP report says that the number of MAP cases is continuing to increase. This report may interest any taxpayer with cross-border financial dealings as it offers valuable insights about the types of issues that may or may not be successfully resolved through the MAP program.
New Report Sheds Light on CRA’s Advance Pricing Arrangement Program
March 14, 2006
The Canada Revenue Agency (CRA) recently released its "Advance Pricing Arrangement Program Report 2004-2005" (the "APA report"). The report’s insights into the program will be of interest not only to companies considering negotiating an APA but also to other companies involved in cross-border transactions within their corporate group.
New CRA Guidelines on Determining Permanent Establishment in Canada
February 7, 2006
The Canada Revenue Agency (CRA) recently issued a new transfer pricing memorandum providing general guidance on how to determine whether a non-resident has a permanent establishment (PE) in Canada. The memorandum deals with scenarios similar to the one in the well-known case Dudney v. The Queen as well as more general situations. The memorandum does not introduce any significant changes in the CRA’s administrative policy in this area.
New Canada-U.S. Agreement on Competent Authority Disputes — Resolving Factual Disagreements
January 17, 2006
The CRA and the IRS have reached an agreement on a key portion of a memorandum of understanding (MOU) signed on June 3, 2005, which sets out principles and guidelines to efficiently resolve competent authority requests through the Mutual Agreement Procedure (MAP) under the Canada-U.S. treaty (see Transfer Pricing 60 Seconds 2005-08). The new agreement, signed on December 8, 2005, establishes an independent review process for resolving disagreements regarding the facts and circumstances of a specific MAP case for further negotiation by the competent authorities.
Glaxo Update — CRA Seeks to Unbundle Transfer Price
October 26, 2005
The Tax Court of Canada recently decided as a procedural matter that Canadian tax authorities could travel to the U.K. to take evidence relating to a transfer pricing case from persons who are neither resident nor physically present in Canada. Although the court has not yet addressed the substantive issue in this case, this procedural decision reveals some interesting details about the case itself, including the CRA’s proposal to unbundle the transfer price and impose withholding tax. The decision also illustrates how costly and complex transfer pricing litigation can be.
CRA Update on Transfer Pricing Review Guidelines
September 12, 2005
The Canada Revenue Agency (CRA) recently updated its guidelines for referrals to its Transfer Pricing Review Committee (TPRC) regarding possible transfer pricing adjustments and penalties to be imposed on taxpayers. The updated guidelines include new details about procedures for referrals to the TPRC regarding penalties and Qualifying Cost Contribution Arrangements.
New Bilateral Agreement on Canada-U.S. Competent Authority Disputes — Next Steps Mapped Out
August 11, 2005
The competent authorities of the Canada Revenue Agency (CRA) and Internal Revenue Service (IRS) recently announced their next steps towards implementing a memorandum of understanding signed on June 3, 2005.
CRA Says Bundled Transfer Pricing Transactions Should be Unbundled
July 25, 2005
The CRA has released a new Transfer Pricing Memorandum (TPM 06), "Bundled Transactions", which aims to provide information on the bundling of transactions in relation to transfer pricing and non-resident tax. Overall, TPM-06 advises that all transactions should be unbundled for transfer pricing purposes if possible. If a decision is made to bundle transactions, then the decision must be fully documented in the contemporaneous documentation.
New Bilateral Agreement Aims to Speed Resolution of Canada-U.S. Competent Authority Disputes
July 5, 2005
The competent authorities of the Internal Revenue Service (IRS) and the Canada Revenue Agency (CRA) signed an agreement on June 3, 2005 that should be good news for taxpayers and advisers involved in cross-border competent authority disputes. The memorandum of understanding sets out principles and guidelines to improve the performance and efficiency of the process for resolving competent authority requests through the Mutual Agreement Procedure (MAP) under the Canada-U.S. tax treaty.
CRA Seeks to Recharacterize Transactions 
June 2, 2005
A senior official of the Canada Revenue Agency (CRA) recently noted that CRA auditors have proposed to recharacterize transfer pricing transactions in 12 files referred to the CRA’s Transfer Pricing Review Committee (TPRC). To date, the TPRC has not decided whether it will approve the application of the Income Tax Act’s recharacterization rules in these cases. This information was presented at the KPMG Global Transfer Pricing Services Seminar Series on May 24 and 26, 2005, in Detroit and Chicago.
CRA Applies Transfer Pricing Penalties in 50 per cent of Files
May 19, 2005
The Canada Revenue Agency’s (CRA) Transfer Pricing Review Committee (TPRC), which meets monthly to discuss transfer pricing files, has to date reviewed 27 files and recommended that transfer pricing penalties be applied in 14 of these files. This statistic was presented to the Canadian Importers and Exporters Association on May 17, 2005, by a senior CRA official.
CRA Releases Advance Pricing Agreement Guidelines for Small Businesses
March 23, 2005
On March 18, 2005, the Canada Revenue Agency (CRA) released Information Circular 94-4R (Special Release), “Advance Pricing Arrangements for Small Businesses” (IC 94-4R(SR)), which is the much anticipated addendum to Information Circular 94-4R, “Advance Pricing Arrangements” (APA).
No APAs for Branches, CRA Says
February 25, 2005
The CRA quietly changed its policy concerning the availability of advance pricing agreements (APAs) for situations involving branches. The CRA’s Information Circular 94-4R, "International Transfer Pricing: Advance Pricing Agreements" stipulates that taxpayers can turn to the APA program to determine prospectively the amount of profits attributable to permanent establishments.
Finance Issues Comfort Letter on Guarantee Fees
February 10, 2005
On December 7, 2004, the Department of Finance Canada released a comfort letter regarding section 247.
Competent Authority Guidelines — CRA Issues Revised Information Circular
February 9, 2005
On February 1, 2005, the CRA released the final version of Information Circular (IC) 71-17R5, "Guidance on Competent Authority (CA) Assistance Under Canada’s Tax Conventions". Among other things, the IC provides a complete list of information that must be submitted to the Canadian CA, including contemporaneous documentation for the relevant taxation year.
CRA’s Use of Third-Party Information: FCA Queries Taxpayer To Determine if Confidentiality Order Was Violated
January 25, 2005
On January 24, 2005, the Federal Court of Appeal (FCA) released its decision in Glaxo SmithKline Inc., a transfer pricing case which demonstrates the potential adverse consequences of the CRA’s use of “secret comparables” provided to the CRA by third parties under confidentiality orders.
CRA Releases Four Important Transfer Pricing Documents
November 29, 2004
On November 17 and 29, 2004, the Canada Revenue Agency (CRA) made available on its website four important documents with respect to transfer pricing.