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sham, finding that there was no evidence to suggest that of Canada on a tax-effective basis, and taxpayers are
the contracts entered into by the parties did not represent entitled to structure their affairs within this regime without
the parties’ true intentions. The decision also reversed the triggering adverse consequences.
Administration’s transfer pricing adjustments under section ➢• The recharacterization provisions of paragraphs 247(2)(b)
247 of the Act for each of the taxation years in question, and (d) will not apply where the taxpayer’s arrangements
concluding that transactions were not commercially are commercially rational and especially where transfer
irrational, thus the criteria in subparagraph 247(2)(b)(i) prices are determined in accordance with the arm's length
had not been met and therefore recharacterization rule in principle, even if the taxpayer utilizes a tax-oriented
paragraph 247(2)(d) did not apply. The Tax Court also found structure.
that prices charged by the taxpayer in the relevant taxation
years were within an arm’s length range of prices and ➢• Determining whether arm’s-length parties would have
concluded that transfer pricing adjustment was not justified entered into a transaction under paragraph 247(2)(b), the
under paragraphs 247(2)(a) and (c). reference should be made to arm’s-length persons rather
than to the particular participants to a transaction.
3. Federal Court of Appeal ➢• In cases where paragraph 247(2)(d) applies, the
Administration has to substitute arm’s-length terms and
The Federal Court of Appeal dismissed the Administration’s conditions based on transactions realized between arm’s
appeal of the Tax Court’s decision. In its appeal, the length parties, rather than substituting the terms and
Administration challenged the Tax Court’s findings regarding conditions with nothing on the presumption that the no
the recharacterization provisions in paragraphs 247(2)(b) transaction would have occurred.
and (d) of the Income Act.
Source:
The Federal Court of Appeal reaffirmed the Tax Court’s - https://www.ey.com/en_gl/tax-alerts/canada-federal-court-of-
decision. There is no evidence that parties dealing with appeal-rejects-crown-appeal-of-tax-court-decision-in-cameco-
each other at arm’s length would not have bought and sold transfer-pricing-case
uranium or transferred between them the rights to buy - Canada - Supreme Court of Canada Denies Tax Authorities
uranium from Tenex or Urenco. In reaching its decision, the Leave to Appeal Federal Court of Appeal Cameco Decision
Federal Court of Appeal referenced the Organisation for Regarding Transfer Pricing Adjustments (26 Feb. 2021),
Economic Co-operation and Development’s (OECD) 2010 News IBFD (accessed 17 July 2021).
Transfer Pricing Guidelines.
- https://research.ibfd.org/#/doc?url=/document/tns_2021-
The Federal Court of Appeal also considered the application 02-26_ca_1
of paragraph 247(2)(d). Paragraph 247(2)(d) of the Act
requires the Court to replace the transactions realized
between the participants with the transactions that would
have been realized between persons dealing with each
other at arm’s length. It does not consider disregarding the
existing transactions, which is the result proposed by the
Administration.

Finally the Federal Court of Appeal asserted that the rules
in paragraph 247(2)(b) and (d) of the Act are not as broad
as the Administration suggests. They do not allow the
Administration to reallocate all of the profit of a foreign
subsidiary to its Canadian parent company with the claim
that the Canadian corporation would not have realized
transactions with its foreign subsidiary if they had been
dealing with each other at arm’s length.
4. Supreme Court of Canada

On 18 February 2021, The Supreme Court of Canada
(Case 39368) has denied the Administration to appeal the
Federal Court of Appeal's decision in The Queen v. Cameco
Corporation. As a result, the Tax Court of Canada's decision
to reverse the tax authorities' transfer pricing adjustments
stands.
5. Conclusion

The Cameco decision of the Tax Court of Canada and Federal
Court of Appeal concluded that:
• Canada’s foreign affiliate regime has a legitimate purpose
to allow Canadian companies to conduct business outside

10 August 2021 Ağustos 2021