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Continued Alignment with OECD Guidelines
Canada applies the arm's length principle to all cross-border transactions, as outlined in sections 247(2)--(4) of the Income Tax Act (ITA). Recent enforcement closely follows the OECD 2022 Transfer Pricing Guidelines for Multinational Enterprises, especially on method choice, comparability, and documentation.
Litigation Trends \& Recent Case Law
Court decisions in 2024–2025 (such as Cameco and Glencore appeals) have clarified acceptable methods, evidence standards, and the CRA's burden of proof. The courts continue to reference the OECD arm's length principle and international best practices in their judgments.
Streamlined Documentation Requirements \& Filing Deadlines
Canadian taxpayers engaging in cross-border dealings with affiliated non-residents must now prepare contemporaneous documentation that strictly follows ITA s.247(4). For fiscal years ending after December 31, 2024, documentation must be completed by the tax return due date (usually within six months after year end). The requirements are enhanced in line with the OECD Master File and Local File standards.
Substantial Penalties for Non-Compliance
If documentation is inadequate or not prepared on time, the CRA may levy a penalty of 10% of any transfer pricing adjustment over the $5,000 threshold. Robust and timely Local and Master Files are key to avoiding penalties and establishing penalty protection.
Revised Guidance on Arm's Length Range \& Statistical Applications
CRA memoranda confirm the use of arm's length ranges, interquartile ranges, and statistical means—aligned with the OECD standard. Loss-making comparables and outliers are generally excluded unless reliably justified.
Pillar 2 (Global Minimum Tax) Adoption \& Legislation
Canada has introduced draft legislation to enact the OECD's BEPS Pillar 2 global minimum tax, setting a 15% minimum for large multinational groups starting in fiscal years after December 31, 2024. The legislation includes extensive disclosure and compliance obligations.
Country-by-Country Reporting
Canadian multinationals with consolidated revenue of €750 million or more must file a CbC report (Form RC4649) within 12 months of their year-end. The CRA is monitoring public CbC reporting developments under the EU for potential Canadian impacts.
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OECD-Style Advanced Pricing Arrangements (APAs)
Canada maintains a sophisticated APA program for unilateral, bilateral, and multilateral deals per Information Circular IC94-4R. CRA is focused on reducing application backlog and aligns the program with OECD BEPS standards, particularly for high-value intangibles.
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New Focus on Intangibles and DEMPE Functions
Canada is implementing OECD guidance on documenting the location and justification of Development, Enhancement, Maintenance, Protection, and Exploitation (DEMPE) functions to test intercompany intangible transactions.
Enhanced Enforcement: High-Risk Transactions
CRA uses data analytics and risk profiling to target cross-border debt, intellectual property, hard-to-value intangibles, and business restructurings. Aggressive enforcement and audit strategies are outlined in annual CRA compliance plans.
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