Budget 2025: A "Modernization" Of Canada's Transfer Pricing Regime

In Budget 2025, the Government proposes significant amendments to Canada's transfer pricing framework, with the stated objectives of "modernizing" the rules and enhancing their alignment with OECD norms, including the application of the "arm's length principle". (By way of background, the proposed amendments largely build off of the consultation paper released by the Department of Finance in June 2023, which followed commentary contained in Budget 2021 suggesting the need for transfer pricing reform). For large Canadian companies and multinational enterprises with Canadian operations, the proposed changes can be expected to have important implications for pricing policies, intercompany documentation, and audit preparation timelines. Budget 2025 estimates that the transfer pricing and other international tax measures announced in the Budget will generate more than CAD $500 million in additional revenue for the Government over the five years following their enactment.