What Canada Income Tax Act Transfer Pricing Section 247 requires
Section 247 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Supp.)), as amended by the Budget Implementation Act 2023, requires that transactions and arrangements between a Canadian taxpayer and a non-arm's length non-resident be priced consistent with the arm's length principle, empowers the Canada Revenue Agency to adjust the amounts of such transactions to reflect arm's length terms under Section 247(2), applies a penalty equal to 10% of the net upward transfer pricing adjustments exceeding CAD 5 million where the taxpayer did not make reasonable efforts to determine and use arm's length prices under Section 247(3), requires maintenance of contemporaneous documentation meeting the standards in Information Circular IC 87-2R and the OECD Transfer Pricing Guidelines under Section 247(4), and mandates reporting of controlled transactions on Schedule 25 of the T2 corporation income tax return and on Form T106 for non-arm's length transactions with non-residents exceeding CAD 1 million in the tax year.
Pillar: Tax & Transfer Pricing · Authority: Parliament of Canada · Version: 1.0.1 · Last updated:
Primary source: https://laws-lois.justice.gc.ca/eng/acts/I-3.3/section-247.html
SHA-256 integrity: 3a5167dfd3ec2732653c39817ad653b110c1f67e5c297849535e9c1eccc0d7ca
Primary Citations — 5 traced to source
- {"title":"Income Tax Act (R.S.C. 1985, c. 1 (5th Supp.)), Section 247","url":"https://laws-lois.justice.gc.ca/eng/acts/I-3.3/","section":"Section 247 (transfer pricing adjustments), Section 233.8 (country-by-country reporting), Section 152(4)(b)(iii) (extended reassessment period for transfer pricing), Section 162 (T106 filing penalties), Section 220(3.1) (taxpayer relief)","relevance":"Primary Canadian transfer pricing provision requiring arm's length pricing for non-arm's length non-resident transactions, empowering CRA adjustments, imposing 10% transfer pricing penalty for documentation failures, and mandating Country-by-Country Reporting for MNE groups with consolidated revenue of CAD 750 million or more"}
- {"title":"CRA Information Circular IC 87-2R - International Transfer Pricing","url":"https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/ic87-2r.html","section":"Paragraphs 1-225 (arm's length principle, transfer pricing methods, comparability analysis, documentation requirements, acceptable methodologies, penalty safe harbour)","relevance":"CRA's primary administrative guidance on Section 247; adopts OECD Transfer Pricing Guidelines as Canadian standard, describes the five acceptable transfer pricing methods, explains the contemporaneous documentation requirement, and sets out the CRA's audit approach for transfer pricing cases"}
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