Proposed Transfer Pricing Reform: What Do Businesses Need To Know?

The 2025 federal budget includes draft legislation that would implement a significant rewrite of Canada's transfer pricing provisions, largely aligned with proposals released in a 2023 Department of Finance Consultation Paper.

How will this development impact multinational enterprises operating in Canada? Here are five things to know about the proposed new rules:

1. New Adjustment Provision. The proposed new adjustment provision captures transactions where the "actual conditions" deviate from "arm's length conditions" (that is, conditions that would have applied if the parties had been dealing at arm's length in comparable circumstances, including the possibility that the parties would not have entered into the transaction at all or would have entered into a different one).