2016-0669801C6 2016 CTF – Q9 – BEPS Action Item 13

Principal Issues: Whether the CRA will require "master file" and "local file" information, in accordance with BEPS Action Item 13, in order to satisfy a taxpayer's responsibility to make "reasonable efforts" to determine and use arm's length transfer prices under section 247 of the Act.

Position: No.

Reasons: Action Item 13 has been dealt with by the introduction of proposed section 233.8, which has no direct relation to section 247.

Author: Beaulne, Dave
Section: 233.1; 233.4; 233.8; 247(4)

2016 Canadian Tax Foundation Annual Conference

CRA Roundtable

Question 9: BEPS Action Item 13

Will the CRA’s expectations of the “reasonable efforts” that a taxpayer must make to determine and use arm’s length transfer prices include the preparation of transfer pricing documentation that is consistent with the recommendations from the OECD in Action 13 of the BEPS initiative (i.e. Master File and Local File transfer pricing documentation)?

CRA Response

The CRA considers that BEPS Action Item 13 has been dealt with by the introduction of proposed section 233.8 of the Income Tax Act relating to Country-by-Country Reporting. The “reasonable efforts” requirement is based on the legislation contained in section 247 of the Income Tax Act, in particular the requirement to produce “contemporaneous documentation” in accordance with subsection 247(4). Proposed section 233.8 has no direct relation to section 247 and does not include a specific requirement to produce a “local file” or “master file”. As such, the CRA has not altered its criteria regarding whether a taxpayer has made reasonable efforts to determine and use arm’s length transfer prices. ?

Dave Beaulne
Yannick Roulier
2016-066980
November 29, 2016

Response prepared in collaboration with:
Alex Ho
Manager
International Tax Division
International, Large Business and Investigations Branch

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