BEPS: Canada Takes First BEPS Steps

Last December we discussed from a Canadian perspective the final reports¹ issued by the OECD on the 15 action items in its base erosion and profitshifting project.²

We expressed the view that Canada is unlikely to adopt — at least in the near term — any of the OECD's substantive recommendations, except those in relation to action 6 (treaty abuse), but we foresaw the adoption of several of the BEPS procedural recommendations. Those predictions have been borne out by the March 22 budget from Canada's new Liberal Party federal government, also containing an unexpected extension of the 2014 anti-back-to-back financing rules, which could be seen to be inspired by the BEPS project. The budget also, unusually, encourages the Canada Revenue Agency to employ most of the action 8-10 recommendations on transfer pricing, even though the Supreme Court made clear in its 2012 decision in Glaxo that the OECD transfer pricing guidelines do not, per se, make law in Canada.³