Crown’s Appeal Dismissed In General Electric Case

On December 15, 2010, the Federal Court of Appeal dismissed the Crown's appeal of the Tax Court of Canada decision in General Electric Capital Canada Inc. v. The Queen.¹

The case considered whether the guarantee fee charged by General Electric Capital U.S. (GECUS) to its indirect subsidiary, General Electric Capital Canada Inc. (GECC), during the 1996-2000 taxation years was an arm's length amount under the transfer pricing rules in the Income Tax Act (Canada) (the Act). GECC had borrowed for a number of years prior to 1996, always with an explicit guarantee from a member of the GE group. In 1995, following an internal review of these arrangements, GECUS began charging an annual guarantee fee to GECC equal to 1% of GECC's outstanding debt.