Canada: No cost-based transfer price reduction | KPMG | BE

Canada: No cost-based transfer price reduction, government assistance

Canada: No cost-based transfer price reduction

Guidance issued by the Canada Revenue Agency (CRA) confirms the CRA’s longstanding administrative policy that Canadian taxpayers that take part in non-arm's length cross-border transactions and receive Canadian government assistance do not reduce their cost-based transfer price by the amount of the assistance.


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The CRA policy was confirmed in a Transfer Pricing Memorandum (TPM-17) (2 March 2016).

The CRA policy accepts, however, that a Canadian taxpayer may reduce its cost base by the amount of government assistance received if there is reliable evidence that arm’s length parties would have shared the assistance.

KPMG observation

In light of the CRA guidance, taxpayers that deduct government assistance amounts from their costs under a cost-based transfer pricing methodology need to be prepared to document support for that reduction on the basis that arm's length parties would have passed some, or all, of the credit on to the foreign recipient of their goods and services.


Read a March 2016 report prepared by the KPMG member firm in Canada: CRA Confirms Government Assistance Not Reduce Cost-Based Transfer Price 

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