2021-0887601C6 2021 IFA Q4 - section 247 Post Cameco

Principal Issues: Can the CRA advise on how it intends to amend its administrative policies in interpreting and applying section 247 of the Act following the Supreme Court of Canada’s decision not to hear the Crown’s appeal in The Queen v. Cameco Corporation, 2020 FCA 112 upholding the Tax Court of Canada’s decision (“Cameco”)?

Position: The CRA is currently reviewing its ongoing cases, in light of the Cameco decision. However the CRA will continue to consider the application of the re characterization provision where appropriate, and will continue to administer and enforce paragraphs 247(2)(a) and (c) in a manner consistent with the guidance provided by the Federal Court of Appeal in Canada v. General Electric Capital Canada Inc. (2010 FCA 344).

Reasons: See below.

Author: Argento, Angelina
Section: 247

2021 International Fiscal Association Conference
CRA Roundtable

Question 4 – Section 247 Post Cameco FCA decision

Can the CRA advise on how it intends to amend its administrative policies in interpreting and applying section 247 following the Supreme Court of Canada’s decision not to hear the Crown’s appeal in The Queen v. Cameco Corporation, 2020 FCA 112 upholding the Tax Court of Canada’s decision (“Cameco”)?

CRA Response

The CRA considers the specific facts in Cameco to have been highly relevant in arriving at the decisions of the Tax Court of Canada (2018 TCC 195) and the Federal Court of Appeal (2020 FCA 112).

That said, the CRA also recognizes that these decisions may limit situations where the re‑characterization provision in paragraphs 247(2)(b) and (d) could be applied.

As such, the CRA is currently reviewing its ongoing cases in light of the Cameco decision. However, the CRA will continue to consider the application of the re‑characterization provision where appropriate.

The CRA will continue to administer and enforce paragraphs 247(2)(a) and (c) in a manner consistent with the guidance provided by the Federal Court of Appeal in Canada v. General Electric Capital Canada Inc. (2010 FCA 344). At paragraph 54 of the latter decision, the Court states, with respect to paragraphs 247(2)(a) and (c):

“…The task in any given case is to ascertain the price that would have been paid in the same circumstances if the parties had been dealing at arm’s length. This involves taking into account all the circumstances which bear on the price whether they arise from the relationship or otherwise.”

Additionally, as recently announced in Budget 2021 (footnote 1) , the government intends to consult on Canada’s transfer pricing rules with a view to protecting the integrity of the tax system while preserving Canada’s attractiveness as a destination for new investment and business activity. The Department of Finance indicated it will release a consultation paper to provide stakeholders with an opportunity to comment on possible measures to improve Canada’s transfer pricing rules.

Angelina Argento/Marie Claude Routhier
2021-088760
May 5, 2021

Response prepared in collaboration with:
Michael Jennings, Director International Tax Division
International, Large Business and Investigations Branch

FOOTNOTES

En raison des exigences de nos systèmes, les notes de bas de page contenues dans le document original sont reproduites ci-dessous :

1 See Budget 2021- Part 4 - Fair and Responsible Government - Chapter 10 “Responsible Government” - Section 10.1 “A Tax System that Promotes Fairness”- “ Protecting the Fairness and Integrity of Our Tax System” at page 308 (available at https://www.budget.gc.ca/2021/...).

PROTECTED B

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