Written By Ed Kroft, Q.C., Claire Kennedy and Deborah Toaze
On February 18, 2021, the Supreme Court of Canada announced that it will not hear the transfer pricing tax appeal involving the Government of Canada and Cameco Corporation. Cameco was previously successful in both the Tax Court of Canada and the Federal Court of Appeal.
The decision of the Supreme Court of Canada not to hear the Cameco transfer pricing appeal will likely be as newsworthy as a decision to hear the appeal would have been.
The Supreme Court of Canada does not issue reasons for dismissing or granting a leave application. Therefore, one might only speculate as to the reasons for the Supreme Court of Canada's actions. Nonetheless, the result of the Supreme Court of Canada's decision not to hear the Cameco appeal is that the decisions of the Federal Court of Appeal and the Tax Court of Canada stand with respect to the interpretation and application of the "recharacterization" provisions in section 247 of the Income Tax Act. Specifically, the Federal Court of Appeal held that the "recharacterization" provisions of section 247 of the Income Tax Act are only applicable in circumstances where no third party would undertake the transactions that the CRA finds offensive.
One might infer that the Supreme Court of Canada was not swayed by the Crown's arguments regarding the national importance of the Cameco appeal, based in part, on the Crown's allegations regarding the magnitude of the transfer pricing assessments issued over the past three years.
By declining to hear the Cameco appeal, the Supreme Court of Canada has provided taxpayers and the CRA with some clarity and certainty regarding the "recharacterization" provisions in section 247 of the Income Tax Act.
Bennett Jones and Transfer Pricing Disputes
Given the government's current assessing practices, corporations should be prepared to defend their positions. Our firm has an experienced team of professionals who have handled transfer pricing disputes at the audit, appeals and court stages and would be pleased to assist with government challenges to any transfer pricing arrangements in place.