Exxon Canada Transfer Pricing Ruling Reveals Diverging Case Law

A Tax Court of Canada judgment will be a helpful guide for companies arranging their transfer pricing affairs in the coming years, despite also highlighting uncertainty about how rules governing intracompany transactions are applied, practitioners said.

The March 6 decision in favor of an Exxon Mobil Corp. subsidiary against the Canada Revenue Agency over deductibility of a pipeline study hinged on whether the subsidiary was acting as a business. Justice Dominique Lafleur concluded that it was, but not before confronting conflicting rulings from higher courts on how to determine an entity’s source of income, a key part of the analysis. ...