CRA TP 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.
CRA TRANSFER PRICING MEMORANDA
This publication is archived and kept for historical purposes. It has been replaced by
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
This document cancels and replaces
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.
This publication is archived and kept for historical
purposes. It has been replaced by
This document cancels and replaces
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.
CANADA TP NEWS
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.
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
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.
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.
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
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
TRANSFER PRICING RESOURCES FOR MEXICO
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