2022-0926341C6 IFA 2022 - Q9 - Contemporaneous Docs and COVID-19

Principal Issues: Whether the CRA considers, in the context of the COVID-19 pandemic, to apply an administrative concession to extend the documentation-due date of a taxpayer or partnership for the purposes of the contemporaneous documentation rules in subsection 247(4), or to otherwise administratively relieve taxpayers or partnerships from their duty to meet their obligations under subsection 247(4).

Position: No.

Reasons: The CRA recommends that taxpayers or partnerships determine their transfer pricing on an on-going basis during the year even if the Act allows them to make or obtain the documentation up to the documentation due-date.

Author: Dion, Jean-Bernard
Section: 220(3.1) and 247(4) ITA.

2022 International Fiscal Association Conference

CRA Roundtable

Question 9 - Subsection 247(4) - Contemporaneous Documentation and COVID-19

Canada’s contemporaneous documentation (“CD”) rules in subsection 247(4) require the completion of CD meeting statutory requirements within six months of the end of the relevant taxation year, a shorter time limit than is found in the analogous rules of most of Canada’s G7 contemporaries (typically one year). Meeting the required standard involves finding suitable comparables and determining appropriate transfer pricing methodologies and documenting the various relevant items within the statutory six-month deadline from year-end. Many taxpayers are finding it particularly challenging to meet the CD standards set out in subsection 247(4) in a COVID-19 environment, due to significant business disruptions that make finding genuine comparables harder and staff shortages that reduce taxpayers’ capacity for generating and documenting this analysis.

Has the CRA considered providing relief to taxpayers making good faith efforts to produce satisfactory CD within the six-month time limit comparable to administrative relief for other cross-border COVID-related tax issues previously announced (e.g., permanent establishment status, residency, etc.)? The binary nature of subsection 247(4) compliance (i.e., one either meets the standard and gets the resulting penalty protection, or does not and gets no protection) makes this an area where administrative relief is particularly necessary for affected taxpayers.

CRA Response

The CRA does not intend to provide, in the context of the situation described above, an administrative relief to extend the “documentation-due date”, as defined in subsection 247(1), of a taxpayer or partnership for the purposes of the CD rules in subsection 247(4), or to otherwise administratively relieve taxpayers or partnerships from meeting their obligations under subsection 247(4).

In determining whether a taxpayer or a partnership has made or obtained records or documents that provide a description that is complete and accurate in all material respects of the items listed in subparagraphs 247(4)(a)(i) to (vi), the CRA will continue to rely on the guidance found in the Transfer Pricing Memorandum TPM-09, Reasonable efforts under section 247 of the Income Tax Act. In this regard, the CRA recommends that taxpayers or partnerships determine their transfer pricing on an ongoing basis during the taxation year or the fiscal period even if the Act allows them to make or obtain the documentation up to the documentation due-date.

As allowed under subsection 220(3.1), the Minister may grant taxpayer relief by waiving or cancelling all or any portion of any penalty or interest otherwise payable under the Act. Such discretionary relief is granted on a case-by-case basis, by the appropriate delegated authority, pursuant to subsection 220(2.01), with due consideration to all of the relevant circumstances. To request this type of relief, a taxpayer has to complete Form RC4288, Request for Taxpayer Relief – Cancel or Waive Penalties and Interest. For more information on existing taxpayer and partnership relief provisions, including the administrative guidelines that the CRA applies when considering requests for relief and the types of circumstances that may qualify, please consult the Information Circular IC07-1R1, Taxpayer Relief Provisions.



Jean-Bernard Dion
2022-092634
May 17, 2022

Response prepared by:
Frédéric Bourgeois
International Tax Division
International, Large Business and Investigations Branch

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