Classic Transfer Pricing Case: Fidelity Investments Canada Ltd. v. Canada 2006

Par Robert Robillard - 25 août 2014

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In Fidelity Investments Canada Ltd. v. Canada (Canada Revenue Agency), 2006 FC 551 (CanLII), the taxpayer asks for judicial review of two requirements issued by the CRA pursuant to section 231.6 of the Income Tax Act.

Applications for judicial review dismissed.


[1] Fidelity Investments Canada Limited (the « Applicant ») brings two applications for judicial review, pursuant to the Federal Courts Act, R.S.C. 1985, c. F-7, as amended, relative to two Notices of Requirement (« Notice » or « Notices »), issued by the Canada Revenue Agency (the « CRA » or the « Respondent »), under section 231.6 of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), as amended (the « Act »). The relief sought by the Applicant is an order varying or setting aside the Notices.

[4] According to the evidence, the Applicant is the subject of an audit by the CRA for the taxation years 1998 to 2002, inclusive. The audit began in February 2002. Prior to receipt of the Notices, the Applicant received a letter, dated March 22, 2004, from the CRA, requesting it to provide certain information and documents. It has complied with the request with the exception of providing the financial statements of FIMMI and FMR Co. to the Respondent.

[…] [32] Specifically, the Respondent says that the financial statements of FMR Co. and FIMMI, two American corporations that are related to the Applicant, are necessary because it is unable to assess the reasonableness of fees paid by the Applicant to FIMMI and to FMR Co. In light of subsection 231.6(6), the fact that the Applicant is related to FMR Co. and FIMMI does not make the requirement to produce information and documents unreasonable. In my opinion, however, the relationship alone does not make the requirements « reasonable ». The factor of relevance must also be satisfied. In my view, there must be evidence that the documents requested are relevant for the purposes of the Act.

[33] The Applicant challenges the Respondent’s dismissal of the two transfer pricing studies that it provided, on the grounds that the Respondent’s employees were unfamiliar with the Lipper methods and did not adequately investigate the bases upon which Coopers and Lybrand and Ernst and Young, respectively, reached their conclusions. The Applicant argues that the Respondent did not understand the two studies.

[34] As noted above, the decision of the Respondent to issue the Notices is reviewable on the standard of reasonableness. The concept of reasonableness includes relevance, relative to the Act. Although the Applicant argues that the information sought is not relevant and that its principal concern here is with the protection of confidential material, I am not persuaded that the material in question is not relevant. I draw this conclusion from the Applicant’s offer to disclose the information to the CRA, albeit in a protected environment where no copies would be made and subject to the provision of an undertaking to maintain confidentiality.

[35] In view of the evidence submitted by the Respondent, I am satisfied that the information sought to be produced, that is the financial statements of FIMMI and FMR Co., is relevant to the conduct of an audit of the Applicant. The conduct of an audit pursuant to the Act is relevant for the administration and enforcement of the Act. »


« [48] These applications for judicial review are dismissed. The Respondent shall have its taxed costs on the basis of Column III of Tariff B, counsel fees for one counsel only and for one proceeding only. »

To see the full transfer pricing case click here. Aussi disponible en français sur ce lien.

Fidelity Investments Canada Ltd. v. Canada (Canada Revenue Agency), 2006 FC 551 (CanLII)

Fidelity Investments Canada Ltd. c. Canada (Agence du revenu), 2006 CF 551 (CanLII)

Robert Robillard, CPA, CGA, MBA, M.Sc. Econ.
Transfer Pricing Chief Economist, RBRT Inc.
514-742-8086; robert.robillard « at » localhost

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