Your Guide To The Transfer Pricing Impact Of The New Canada-US Protocol

The Income Tax Act (Canada) contains an extensive set of transfer pricing rules designed to ensure that cross-border transactions entered into between Canadian taxpayers and non-residents with which they do not deal at arm’s length are priced on an arm’s length basis. Not surprisingly, difficulties frequently arise when the Canada Revenue Agency (the "CRA") applies these transfer pricing rules in a manner that is inconsistent with the assessing position adopted by a foreign revenue authority. Such conflicts are contemplated and, at least to a certain degree, addressed in most of the income tax treaties to which Canada is a party, including the Canada-United States Income Tax Convention.