The "Marzen" Decision: A typical Example Of BEPS

On June 10, 2014, the Tax Court of Canada ("TCC") delivered its most recent decision on transfer pricing, one which involved a Barbados structure. In Marzen Artistic Aluminum Ltd. v. The Queen¹ ("Marzen"), Justice Sheridan upheld the Canada Revenue Agency's ("CRA") transfer pricing adjustment as well as the penalty under subsection 247(3) of Canada's Income Tax Act ("Act"). The timing of the Marzen decision is of particular interest when you consider the ongoing work by the Organisation for Economic Co-operation and Development ("OECD") on base erosion and profit shifting ("BEPS").² The Marzen case provides a perfect example of what would appear to be a tax-driven transfer pricing structure involving a low-tax jurisdiction where there is a clear separation between the location of substantive business activities and the jurisdiction where taxable profits are reported. This type of structure, although designed with the intention of being legally effective, is the