Franco-Nevada Corporation ("Franco-Nevada") announced the settlement with CRA of its appeal of reassessments under the transfer pricing rules for its 2013 to 2019 taxation years related to income generated by two of its wholly-owned foreign subsidiaries, Franco-Nevada (Barbados) Corporation and Franco-Nevada Mexico Corporation, S.A. de C.V. ("Franco-Nevada Barbados" and "Franco-Nevada Mexico", respectively). Highlights of the settlement:
- The settlement will not require the payment of any tax in Canada on the foreign earnings of Franco-Nevada Barbados and Franco-Nevada Mexico for the above taxation years.
- The service fee charged by Franco-Nevada for certain services provided to Franco-Nevada Barbados and Franco-Nevada Mexico will be adjusted to increase the mark-up applied to Franco-Nevada's cost of providing those services from the current range of 7-20% to 30%.
- This additional service fee will result in Franco-Nevada being subjected to Canadian tax on additional income of C$1.4 million in Canada for the 2013 to 2019 taxation years. After the application of non-capital losses, Franco-Nevada does not anticipate any additional cash taxes will arise in respect of these years as a result of the settlement.
- Transfer pricing penalties reflected in the above reassessments will be reversed; and interest charges will be reduced and adjusted consequentially to the above adjustments.
- Franco-Nevada anticipates that the transfer pricing principles established by the settlement will apply to years after 2019, provided there are no material changes to the facts or law.
Franco-Nevada has settled its appeal of CRA reassessments of its 2013 to 2019 taxation years in respect of its Barbados and Mexican subsidiaries on the basis that:
- it will not be required to recognize any FAPI in respect of those subsidiaries for those taxation years; and
- the service fees charged by Franco-Nevada for certain services provided to those subsidiaries will be adjusted to increase the markup applied to Franco-Nevada's cost of providing those services from the current range of 7% to 20%, to 30%.
[Regarding the first point, it is understood that CRA had reassessed on the basis (contrary to 2000-0062337) that an historical Gold Wheaton company (acquired by Franco Nevada in 2011), which had been spun-off by Goldcorp and had been created to hold streaming agreements in relation to Goldcorp mines, was generating income from property because the streams were “royalties or any similar return or substitutes for such … royalties or returns".]
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