The Canada Revenue Agency (CRA) has cancelled the Circular IC 87- 2R as from 30 December 2019, because it is inconsistent with the interpretation and application of Canadian transfer pricing legislation and does not reflect updates to the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations. It is CRA’s practice to generally apply the guidelines to apply the transfer pricing (TP) rules in section 247 of the ITA.
The Circular stated that as a general rule, the specific provisions of the Income Tax Act relating to cross-border debt would be applied before considering the more general provisions of section 247 of the Act, which is inconsistent with CRA’s interpretation of the Act’s transfer pricing legislation. Except as otherwise specified in the tax rules, the CRA considers that section 247 applies to all cross-border transactions with non-arm’s length entities that are relevant under the tax rules.
