Recent Transfer Pricing Case: McKesson Canada Corporation v. The Queen

Par Robert Robillard - 20 octobre 2014

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In McKesson Canada Corporation v. The Queen, 2013 TCC 404:

« [1] The principal appeal by McKesson Canada Corporation (“McKesson Canada”) concerns the amount of the transfer pricing adjustment made by the Canada Revenue Agency (“CRA”) to its income under paragraphs 247(2)(a) and (c) of the Income Tax Act[1] (the “Act”) in respect of financial transactions involving McKesson Canada and several of its non-arm’s length and related non-Canadian affiliates during its 2003 taxation year. The related appeal involves the secondary issue of McKesson Canada’s liability under the Act for its failure to withhold and remit to CRA an amount equal to the Part XIII non-resident withholding tax from the disallowed amounts paid by it to its non-resident parent.

[2] As described in greater detail below, in 2002 it was decided by the McKesson Group that McKesson Canada would sell the receivables owing to it from its customers to a related non-resident McKesson Group entity at a discount. A facility was put in place pursuant to which the receivables would be transferred by McKesson Canada daily at a discount from the face amount of each transferred receivable. »

The taxpayer’s appeals were dismissed with costs. The Court wrote:

« [352] The Court has concluded that its best estimate of the range of Discount Rate to which arm’s length parties to a notional arm’s length RSA would agree is between 0.959% and 1.17%.

[353] The taxpayer has not been able to establish with sufficient credible and reliable evidence, that the RSA Discount Rate of 2.206% was computed based upon arm’s length terms and conditions.

[354] The evidence does not show that the Discount Rate used by the Minister of National Revenue (the “Minister”) in the reassessment of 1.013% was below a Discount Rate computed on arm’s length terms and conditions for a notional arm’s length RSA. The Court can not conclude on all of the evidence that the reassessment was incorrect as it was within the arm’s length range determined by the Court.

[355] In any event it is not necessary to fix a particular point within the determined range as the arm’s length transfer price as, importantly, the taxpayer’s evidence does not rise to the level of making out a prima facie case that “demolishes” the key assumptions of fact made by the Minister that support the reassessments. »

To see the full transfer pricing case click here.

McKesson Canada Corporation v. The Queen, 2013 TCC 404 (CanLII)

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

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

RBRT Inc. is all about transfer pricing. We specialize in transfer pricing. Our services include transfer pricing documentation, transfer pricing dispute resolution, advanced pricing agreement (APA), value chain management and TP planning, transfer pricing training. The information in this blog post is general information only. Data and information come from sources believed to be reliable but complete accuracy cannot be guaranteed. RBRT Inc. and the author are not responsible or liable for any error, omission or inaccuracy in such information. Readers should seek independent tax advice and tax counsel from RBRT Inc. as required.