FCA Refuses To Pierce The Corporate Veil In Cameco Transfer Pricing Case

On June 26, 2020, the Federal Court of Appeal (FCA) issued a unanimous decision¹ upholding the decision of the Tax Court of Canada in Cameco Corporation v The Queen.² The case provides additional clarity with respect to the application of Canada's transfer pricing rules found in section 247 of the Income Tax Act (Canada) (the Tax Act),³ which govern transactions between Canadian residents and non-arm's length non-residents of Canada.⁴

What you need to know

The FCA unanimously rejected an attempt by the Canada Revenue Agency (CRA) to use the transfer pricing rules to pierce the corporate veil and disregard taxpayers' true legal relationships.

The purpose of Canada's transfer pricing rules is to ensure that transactions between non-arm's length parties are conducted on arm's length terms and conditions.