TPM-05R Requests for Contemporaneous Documentation has been updated

Par Robert Robillard - 28 mai 2014

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On March 28, 2014, CRA published an updated version of TPM-05.

TPM-05R pertains to the Contemporaneous documentation requirements (C-doc) in Canada as stated in subsection 247(4) of the Income Tax Act (ITA).

Changes are as follow and should be of interest to any Canadian taxpayer involved in controlled transactions in Canada and abroad.

Paragraphs 9 and 10 of the new TPM-05R state that C-doc requests must be addressed to the taxpayer as soon as the CRA audit pertains to transfer pricing:

“9. Requests for contemporaneous documentation must be issued at the stage of initial contact with the taxpayer in all audits where there are transactions (as defined in subsection 247(1) of the Income Tax Act) between a taxpayer and a non-resident person with whom the taxpayer does not deal at arm’s length. […]

10. If auditors were not aware of these transactions when they first contacted the taxpayer, they must issue requests for contemporaneous documentation when they first learn about the transactions.”

Paragraph 13 of the TPM-05R explains the relationship between the APA mechanism and the transfer pricing audit:

“13. Nonetheless, in all situations where the taxpayer already has an APA, which may or may not include a rollback period, or has made claims to request one, auditors must contact the Competent Authority Services Division before issuing the request for contemporaneous documentation to evaluate whether the request should be issued. See Transfer Pricing Memorandum TPM-11, Advance Pricing Arrangement Rollback, for more detailed information about APAs.”

Of note, all requests for C-doc involving large files previously had to go through the Large File Case Manager (LFCM) prior to being presented to the taxpayer. However, the new TPM-05R indicates that the LFCM must now solely be “informed”:

“14. The large-file case manager must be informed of all requests for contemporaneous documentation involving large business audit cases and will receive a copy of all requests issued to the taxpayer.”

New paragraphs 17-19 specify that the 3-month deadline as per 247(4)c) ITA is always to be calculated in months, never considered in days:

“17. The three-month deadline cannot be altered or interpreted as meaning a number of days (such as 90 days or 92 days). Section 28 of the Interpretation Act explains how to calculate the three-month period. Under paragraph 28(c) of the Interpretation Act, the day on which the three-month period expires will bear the same calendar day number as the specified day [Specified day is the day on which the request for contemporaneous documentation is served (received).]. If the calendar day does not exist in the month in which the period of time expires, the period will expire on the last day of that month. This addresses the months of the calendar year that do not have days 29, 30, and 31.

18. For example, when a request for contemporaneous documentation is served on April 15, the taxpayer has until July 15 of the same year to provide the documentation. Similarly, when a request is served on April 30, the taxpayer has until July 30 to provide the documentation, not July 31. However, if a request is served on January 31, the taxpayer has until April 30 to provide the documentation because April does not have a 31st day. If a request is served on March 31, the taxpayer has to provide the documentation by June 30. If the request is served on November 30, the taxpayer has to provide the documentation by February 28 of the following calendar year (or February 29 in the case of a leap year).

19. When the last day to comply falls on a holiday, the taxpayer has until the next day that is not a holiday to comply, according to section 26 of the Interpretation Act. A holiday includes statutory and provincial holidays, Saturdays, and Sundays [Refer to section 26 and subsection 35(1) (including the notes) of the Interpretation Act.].”

Paragraphs 21-26 give more clarity to the meaning of « provide records or documents ». C-doc requests must be met with the production of specific documents, not simply with documents “made available” to CRA.

The CRA auditor must now formally “respond to the taxpayer once the contemporaneous documentation has been provided” in writing.

As applicable, paragraphs 27-29 indicate that in order to identify if “reasonable efforts” have been made, the file will be referred to the Transfer Pricing Review Committee (TPRC).

For greater certainty, paragraph 29 states that:

“Taxpayers may choose to use the Pacific Association of Tax Administrators (PATA) [currently known as the Leeds Castle Group] Transfer Pricing Documentation Package in order to avoid the imposition of PATA member transfer pricing penalties with respect to a transaction. The documentation package provides an exhaustive list of documents that the PATA tax administrators view as necessary to provide transfer pricing penalty relief.”

Paragraph 30 concludes:

“30. The Income Tax Act is specific as to the requirements regarding contemporaneous documentation. The onus is on the taxpayer to maintain such documentation and provide it to the CRA as requested. Taxpayers must respond to all requests for contemporaneous documentation regardless of previous CRA involvement.”

For pdf format: click here

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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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.

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