Canada Sets Up Big Changes for Company Affiliate-Pricing Rules

Canadian tax professionals see a future with more tax disputes and probably higher tax bills under rules the government proposed this week strengthening its power to decide if a company’s affiliate transaction pricing is out of line.

The Department of Finance revealed a long-awaited proposal to rewrite transfer pricing rules neutered by a 2021 Federal Court of Appeal decision that sidelined the Canada Revenue Agency’s preferred interpretation of the regulations.

The court rejected the agency’s application of a rule that requires it to recalculate, or “recharacterize,” an intracorporate transaction, a critical step in ...