Tuesday, 24 February 2015

Canada: CRA releases guidance on the use of multiple year data

On February 13, 2015, the Canada Revenue Agency (CRA) released Transfer Pricing Memorandum (TPM)-16, Role of Multiple Year Data in Transfer Pricing Analyses.

TPM-16 expands on guidance provided by the CRA in its Information Circular (IC) 87-2R, International Transfer Pricing, which was published in 1999, not long after the transfer pricing provisions of Canada's Income Tax Act (ITA) first came into effect. The TPM confirms the CRA's position of examining transfer prices on a year-by-year basis and distinguishes between using multiple year data for comparability purposes versus using it for purposes of substantiating a transfer price. It also addresses the appropriate use of statistical tools in transfer pricing analyses and stresses the importance of using qualitative assessments when selecting comparables. Finally, TPM-16 gives some insight into the CRA's position on the arm's length range and when audit adjustments should and should not be made, and what the starting point of such an adjustment might be.
Source & more info: PwC