Global Tax Adviser, March 29, 2016. CRA's longstanding administrative policy is that Canadian taxpayers that take part in non-arm's length cross-border transactions and receive Canadian government assistance should not reduce their cost-based transfer price by the amount of the assistance. This policy is now confirmed in a new Transfer Pricing Memorandum (TPM-17) which the CRA released on March 2, 2016.
The CRA does accept, however, that a Canadian taxpayer may reduce its cost base by the amount of government assistance it has received if there is reliable evidence that arms' length parties would have shared the assistance.
In light of this new guidance from the CRA, taxpayers that deduct government assistance amounts from their costs under a cost-based transfer pricing methodology should 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.
For more information, contact your KPMG adviser.
Information is current to March 29, 2016. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500416.777.8500