Judicial Review Application Preserved In Transfer Pricing Penalty Case

A recent Federal Court of Appeal (FCA) case illustrates how contentious transfer pricing disputes can be – even one a taxpayer believed had been resolved! It also represents a rare situation in which the taxpayer's application for judicial review, alleging abuse on the part of the Minister of National Revenue, was not struck out as the Minister had requested.

In 2007, Sifto Canada made a voluntary disclosure to CRA to correct the transfer price of rock salt sold to a US affiliate in the years 2004-2006. CRA's voluntary disclosure program provides relief from penalties and interest to taxpayers that come forward to the tax authorities to correct past misfilings and who meet the program's conditions. Sifto Canada's voluntary disclosure was accepted and the Canadian and US Competent Authorities reached an agreement on the transfer price, which Sifto Canada accepted, on the basis that the agreed price was final and binding and no penalties would apply. Despite that