On 26 June 2020, the Federal Court of Appeal made decision in a transfer pricing case, entitled “The Queen v. Cameco Corporation, 2020 FCA 112” in favour of the taxpayer, i.e. Cameco Corporation.
The Cameco Corporation, together with its subsidiaries, is a large uranium producer and supplier of conversion services. Cameco had uranium mines in Saskatchewan and uranium refining and processing facilities in Ontario. Cameco also had subsidiaries in the United States that owned uranium mines in the United States. The Canadian Revenue Agency found that the transactions between Cameco Corp and the Swiss subsidiary (CEL) constituted a sham arrangement resulting in improper profit shifting. The point is according to section 247(2) of the Income Tax Act (ITA), Cameco would not have entered into any of the transactions that it did with CESA and CEL with any arm’s length person, cf. paragraph 247(2) of the Act. All of the profit earned by CEL should therefore be reallocated to Cameco Corp. The CESA is the Luxemburg subsidiary of Cameco Canada. Cameco Corp. disagreed with the Agency and brought the case to the Canadian Tax Court. In the year 2018, the Tax Court made its decision in favour of Cameco Corp. and dismissed the assessment. This decision was then appealed by the tax authorities to the Federal Court of Appeal.
In a consequences, the Federal Court of Appeal dismissed the appeal and also ruled in favor of Cameco corporation.
