Transfer Pricing – CRA states that the cost of capital property does not become statute barred

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(June 14, 2017) Generally transactions becomes “statute barred” in Canada after three years and are not subject to adjustments by the Canada Revenue Agency (CRA). Given the specific treatment of many Transfer Pricing issues in Canada, a Technical Interpretation was requested relating to CRA Transfer Pricing Adjustments in the context of the Statute Barred limitations.

In response, a technical interpretation (2016-0631631I7, September 14, 2016) relating to Transfer Pricing was issued by the Canada Revenue Agency (CRA). This interpretation states that in the context of a Transfer Pricing audit or review, an adjustment relating to the cost base of a capital property can be made at any time, even if the acquisition year would normally be statute barred.

In addition, the technical interpretation states that a penalty under subsection 247(3) can also be imposed at any time.

This position which specifically relates to Transfer Pricing is consistent with other sections of the Canadian Income Tax Act, and underscores the importance of the asset valuations used when assets are transferred between related parties.

Relevant sections referred to in the interpretation on Transfer Pricing of capital assets in Canada are ITA sections 247(2) and 247(3).