Transfer Pricing
MILLAR KREKLEWETZ LLP is a boutique Canadian law firm with lawyers who have significant expertise in transfer pricing matters involving multi-national enterprises, including transfer pricing issues arising under the Canadian Income Tax Act, Excise Tax Act, and Customs Act.
The following is a short introduction to transfer pricing in Canada.
Transfer Pricing
Overview of Transfer Pricing Requirements in the Income Tax Act
Canada's Income Tax Act provides for significant penalties where transfer pricing errors between multi-national entities are found. Where transfer pricing errors are found, and transfer pricing adjustments made which exceed either $5 million or 10% of gross revenue, transfer pricing penalties can be levied, equal to 10% of the amount of the adjustment (i.e., not 10% of the underlying tax).
Penalties may be avoided if contemporaneous transfer pricing documentation is in place, and Millar Kreklewetz LLP assists in transfer pricing reviews, and provides opinions as to the reasonableness of the particular transfer pricing methodology selected.
Recent Trends in Transfer Pricing
Recent Canada Revenue Agency ("CRA") assessment practices have now begun to focus on transfer pricing issues, and levy significant transfer pricing penalties across Canada where errors are found. The CRAs Transfer Pricing Review Committee (TPRC) is the Ottawa based committee that has the final say on transfer pricing penalties levied in Canada, and there appears to be a mandatory referral requirement within the CRA, ensuring that the TPRC is involved prior to the issuance of transfer pricing penalties.
Recent experience indicates that after several years of administrative tolerance being afforded to the the Canadian-based arms of multi-national enterprises, transfer pricing adjustments are now being levied as a matter of course -- perhaps putting a premium on ensuring that one's transfer pricing documentation is in place.
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