Canada

A continuous evolution of transfer pricing

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Companies must properly report and document international activity in a rapidly changing global landscape. Tansy Jefferies and Enrique Rayon from RSM’s international tax practice talk about the evolution of transfer pricing and what that means to companies operating globally. 

What impact do recent changes in policies have for transfer pricing approaches of Canadian companies? 

The action plan stemming from the Base Erosion and Profit Shifting (BEPS) global project results in tax authorities focusing on more transparency – but what does that mean? In a nutshell: greater transparency means a new format of documentation. 

Country-by-country reporting is a requirement for Canadian multinational enterprises with consolidated group revenue exceeding €750 million. Secondary reporting mechanisms also exist which require Canadian subsidiaries of multinational enterprises with consolidated group revenue exceeding €750 million to file a country-by-country report under certain circumstances.

The Canadian Revenue Agency has explicitly stated that country-by-country reporting will be used to assess high level transfer pricing risk, BEPS-related risks, and for economic and statistical analysis. We expect this will result in more targeted and in-depth transfer pricing audits, with heightened focus on understanding whether the conduct of the parties aligns with what you're actually documenting in your study. You should expect a greater level of verification of the economic conduct of the parties.

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