Applying The Transfer Pricing Rules To Guarantees

At the time Canada was amending its transfer pricing rules, much concern – and some confusion – arose over the potential application of the rules to financial transactions.

This was particularly the case where the tax consequences of applying those rules to financial transactions were already regulated under other provisions of the Canadian Income Tax Act. In response to these concerns, Canada Revenue Agency (CRA) made a number of statements in Information Circular 87-2R – International Transfer Pricing about the possible application of the general transfer pricing provisions in section 247 as follows:

• In general, section 247 does not change the existing law as it relates to inter-corporate debt and equity investments.