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This will interest related companies in Canada and the U.S. that have, or will be, restructuring their business. |
| CRA Endorses OECD Draft on
Business Restructuring |
The Canada Revenue Agency continues to focus on any company that, after a series of transactions, restructures their business to reduce income taxes paid in Canada on a go-forward basis.
This helps explain why a CRA official in the Fall 2008 endorsed the Discussion Draft on the Transfer Pricing Aspects of Business Restructuring published by the OECD. The OECD sets the international model on taxation used by most countries including Canada. The "OECD Draft" specifically covers four issues:
1. Risk profile of the related parties
2. Valuation at the time of restructuring
3. Transfer Pricing after the restructuring
4. Disputes and re-characterization
Further details on the OECD Draft, including responses from a wide range of interested groups, can be found by clicking here. |
Ex-CRA Official Speaks Out
on Business Restructuring |
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Phil Fortier, the former director of the CRA's International and Large Business Directorate, said Canada may recharacterize transactions that result in offshore ownership of significant intellectual property.
Mr. Fortier said one view is a Canadian company "in fact would never allow an arm's length party to gain ownership of its most significant intangible property, and therefore every transaction that results in offshore ownership of significant IP should be recharacterized."
Other viewpoints, he said, would vary the treatment depending on the situation, respecting the form of the transaction but scrutinizing the valuations used "with a high degree of skepticism."
Mr. Fortier provided the above comments and others on a broader range of transfer pricing issues during an interview by the BNA Tax Management on February 20, 2009. |
| Montreal Co. Reassessed Millions
for Business Restructuring |
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Gildan Activewear Inc. agreed with the Canada Revenue Agency to a US$27 million tax assessment and US$17 million reclassification of future income tax liabilities for the restructuring of its international wholesale business and the related transfer of assets to its Barbados subsdiary in 1999.
The company has a low consolidated tax rate because the majority of its profits are earned in Central America and the Caribbean Basin, where its sales, marketing and manufacturing functions are managed and performed. |
| Transfer Pricing Services |
Please conta ct MDW Consulting Inc. if you have questions about this or other transfer pricing issues that concern you. |
