Simplified Canadian Transfer Pricing Rules

Download a PDF copy of this Blog here.

Canada’s transfer pricing rules were first introduced in 1997 and essentially require Canadian businesses transacting with related foreign parties – for example, buying, selling or licensing goods, services and intangibles within a multinational corporate group – to maintain written documentation explaining how their prices comply with internationally accepted arm’s length principles. The Canada Revenue Agency (“CRA”) has historically adopted the OECD Transfer Pricing Guidelines for that purpose.

Problematically, the traditional rules have been so complex that they are often only truly workable for the largest multinational enterprises, and even then subject to years of litigation. For smaller businesses, the traditional rules have imposed disproportionate compliance costs relative to their policy objective.