The Department of Finance Canada, on June 6, 2023, released the much-awaited transfer pricing public consultation paper Consultation on Reforming and Modernizing Canada’s Transfer Pricing Rules. The Federal Budget 2021 previously announced the Government’s intention to consult on Canada’s transfer pricing rules to protect the tax system’s integrity while preserving Canada’s attractiveness as a destination for new investment and business activity. The consultation paper includes proposed draft revisions to Section 247 of the Canada Income Tax Act (“the Act”) and potential changes to administrative measures.
The catalyst for these changes and consultation is the view that Canada’s existing transfer pricing legislation does not provide clear guidance on applying the arm’s length principle, and the rules have not been revised since their introduction in 1997. In comparison, other countries have updated their transfer pricing rules to align with international tax reform and related developments with detailed guidance and provisions.
Segal GCSE will continue to review the consultation paper and monitor related developments in the coming months to provide inputs on what is likely to be a key milestone in Canada’s transfer pricing legislative reform at a crucial time for taxpayers in an ever-evolving complex international tax landscape.
This consultation process allows key stakeholders to actively participate and shape a transfer pricing framework that is robust and sustainable for the future. Comments and responses are invited to 23 questions from various stakeholders by July 28, 2023.
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