• Service: Tax, Global Transfer Pricing Services
  • Type: Survey report
  • Date: 10/9/2013

Tax authority views: Canada 

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How are tax authorities conducting APAs? What are they concerned with? These exclusive interviews can help taxpayers simplify the process. We have gathered feedback from the tax authorities of various key countries to find out the specifics about their APA programs. Read the following Q&A interview on the topic of APAs in Canada with Sue Murray, Director, Competent Authority Services Division, Canadian Revenue Authority (CRA).


Q: What are, in your view, the main achievements of your APA program?


  • The significant growth in applications over the past 5 years is a major achievement for the APA program. This shows that taxpayers see tangible benefits from the program, which includes reduced overall transfer pricing compliance costs.
  • Recent staffing increases have ensured that the APA program is now ‘right-sized’ in terms of capacity technical proficiency.

Issues and challenges

Q: What are the main challenges facing your APA program?


  • The APA program’s greatest success is also one of its greatest challenges: although the APA program is currently staffed appropriately, maintaining the right mix of economists and analysts with the requisite knowledge and experience is always difficult, especially as applications continue to grow.
  • Continued growth in capacity is also impacted by the increasing complexity of new APA applications. As APA applications grow more complex, the number of staff required and the time spent on a given application increases.
  • Information availability is another issue which can slow or hinder the completion of an APA due to required information being too costly or impossible to obtain. In order to alleviate this issue, the CRA tries to request most required information upfront to identify any potential gaps in information early in the application process.
  • All of the above factors continue to affect the timeline for completing the current (older) inventory of APA submissions; however, improved timelines are already being realized on new files on account of larger capacity and improved processes.

Q: Are there particular substantive issues (for instance, marketing intangibles or buy-ins for cost sharing arrangements, etc.) that have been more difficult to deal with?


  • Intangibles remain the most difficult issues to deal with. Although the specific facts of each case vary, intangibles are often at the core when a particular file is difficult to resolve.

Q: Are there particular procedural issues (for instance, APAs involving more than two jurisdictions or APAs where prior years are under the mutual agreement procedure and these involve large proposed adjustments, etc.) that have been more difficult to deal with?


  • Procedural issues involving multilateral APAs are always very time consuming due to the multiple competing interests involved.
  • Gathering prior year information is another difficultly due to the fast pace of business and staffing changes within the taxpayer's organization which lead to historical information gaps.

Q: Are there any other issues that you would like to bring to the attention of taxpayers as potentially difficult?


  • Investing the time and effort in due diligence and rigor upfront is important for taxpayers. Providing as much information as possible upfront helps to identify and address any information gaps which might slow the APA process.
  • Taxpayers benefit from being flexible on the application of different transfer pricing methods during the APA process.
  • The CRA has determined it is inappropriate to address most business restructuring issues in the context of an APA.

Best practices

Q: From your experience, what are the main best practices that you would recommend that taxpayers adopt in requesting and filing for an APA?


  • The CRA now requires that the pre-filing package be submitted and reviewed internally before a pre-filing meeting can be scheduled. This way, any potential issues or information gaps can be identified and addressed before the pre-filing meeting.

Trends and outlook

Q: Based on your experience, have you noticed certain trends in any of the following topics:

  • Type of APA requested (unilateral vs. bilateral)

A: Requests for bilateral APAs are the most common.

Multilateral APAs are often requested, but due to their time consuming, expensive and uncertain nature, their acceptance is contingent on the significance of the value-added over pursuing separate bilateral APAs.

Unilateral APAs are not commonly encouraged or sought.

  • Type of transaction covered

A: The majority of APAs are in respect of tangible goods transactions, with services and intangibles splitting the remainder roughly equally. There are relatively few financing APAs.

Nevertheless, APAs concerning intangibles (in particular) and services account for a relatively larger portion of the time and effort incurred by the APA program because of their complexity.

  • Transfer Pricing Methodology (TPM) proposed

A: The Transactional Net Margin Method (TNMM) is still the most frequently proposed TPM for APAs.

  • TPM agreed upon

A: The TNMM is still the most frequently agreed upon TPM.

  • Reason for APA filing (difficult transfer pricing audits/examinations; desire for certainty; other)

A: Taxpayers most frequently initiate APAs because of recent experiences with difficult audits.

Foreign audits and foreign disclosure requirements have more recently become strong motivations for pursuing APAs.

  • Are there particular industries seeking APAs?

A: The industry breakdown of taxpayers pursuing APAs has been stable over the life of the program, and is also relatively consistent with the composition of the overall Canadian economy.

Q: Looking to the future, what do you foresee for APAs?

  • Do you see an increase vs. stability in terms of demand for APAs?

A: Interest in the APA program is expected to continue growing, but at a more stable pace is expected compared to prior years.

  • APA staffing needs for tax authority

A: Due to recent staffing increases in the Competent Authority Services Division, current staffing levels meet or exceed current requirements.

  • Mechanism to deal with triangular issues

A: Triangular issues associated with multilateral APAs are generally dealt with on a case by case basis due to the uniqueness of each given set of circumstances.

  • Arbitration

A: The CRA prefers resolutions reached through negotiation rather than arbitration. Arbitration is expensive and can often lead to results that are less optimal than those that could be obtained through successful negotiations.

Arbitration continues is increasingly being included in new tax treaties (or protocols); however, the trend internationally appears for arbitration to only apply for MAP cases and not APAs.

  • Other?

A: The CRA continues to work towards improving APA completion times for the current inventory of APA submissions through more efficient policies/procedures and ‘right-sized’ personnel levels.


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