The decision of the Tax Court of Canada in Marzen Artistic Aluminum Ltd. v. The
Queen (2014 TCC 194) is the latest addition to a
growing body of Canadian judgments on the application of the
transfer pricing rules in section 247 of the Income Tax
Act (Canada) (the "Act").
In a lengthy set of reasons, the Tax Court upheld all but a
fraction of the CRA's reassessment of the taxpayer, such
reassessments having disallowed the deduction of approximately
$7.1M of fees paid by the Canadian taxpayer to its Barbados
subsidiary. The Court also upheld the imposition of a penalty under
subsection 247(3) of the Act.
The taxpayer was in the business of designing, manufacturing and
selling aluminum and vinyl windows. Beginning in 1999, the taxpayer
implemented what the Court referred to as the "Barbados
Structure". Under this structure, the taxpayer entered into a
"Marketing and Sales Services Agreement"
("MSSA") pursuant to which the taxpayer's Barbados
subsidiary ("SII") would
