Recent Transfer Pricing Case: Marzen Artistic Aluminum Ltd. v. The Queen

By Robert Robillard - 27 October 2014

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In Marzen Artistic Aluminum Ltd. v. The Queen, 2014 TCC 194, the Court analyze of the applicability of paragraphs 247(2)(a) and (c) and of paragraph 247(3) [transfer pricing penalities].


“[1] These appeals arise out of a transfer pricing adjustment made by the Minister of National Revenue (the “Minister”) under paragraphs 247(2)(a) and (c) of the Income Tax Act (the “Act”) in respect of fees paid by the Appellant to Starline International Inc. (“SII”), a Barbados-based corporation wholly owned by the Appellant. In computing its income for 2000 and 2001, the Appellant deducted the fees paid to SII of CAD$4,168,551 and CAD$7,837,082, respectively.

[2] In 2000 and 2001, SII paid to Starline Windows Inc. (“SWI”), another corporation in the Appellant’s group of companies, a total of US$1,383,723 and US$1,811,992, respectively, for the secondment of its employees to perform certain services for SII.

[3] In 2000 and 2001, SII declared dividends of CAD$2,011,500 and CAD$5,299,620, respectively. The Appellant included these amounts in its income for Canadian tax purposes in the 2000, 2001 and 2002 taxation years. The dividends were then deducted from the Appellant’s taxable income pursuant to section 113 of the Act on the basis that they had been paid out of SII’s exempt surplus.”


“[242] In accordance with the Reasons for Judgment attached, the appeals of the 2000 and 2001 taxation years are allowed, in part, and the reassessments are referred back to the Minister of National Revenue for reconsideration and reassessment on the basis that an arm’s length’s party would have paid an amount to Starline International Inc. that exceeded the fees paid by Starline International Inc. to Starline Windows Inc., but only in the amount of US$32,500 in each of 2000 and 2001.”

To see the full transfer pricing case click here.

Marzen Artistic Aluminum Ltd. v. The Queen, 2014 TCC 194 (CanLII)

An appeal has been filed at the Federal Court of Appeal (of Canada).

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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