Transfer Pricing 2023: Law & Practice

1. Rules Governing Transfer Pricing

1.1 Statutes and Regulations

The rules governing transfer pricing in Canada are primarily contained in Section 247 of the Income Tax Act (Canada) (ITA). Subsection 247(2) of the ITA provides that when a Canadian taxpayer and a non-resident person do not deal at arm's length, the Canada Revenue Agency (CRA) may make any adjustments to the transfer prices necessary to reflect the quanta or nature of the amounts which would otherwise have been consistent with the terms of an arm's length transaction (the "Primary Transfer Pricing Adjustment").

Some provincial and territorial corporate income tax legislation include transfer pricing rules, which are aimed at harmonising the federal transfer pricing rules set forth in the ITA.