CRA affirms its policy on accepting bilateral adjustments to domestic or cross-border management fees

CRA has affirmed that, where the deduction of part of a management fee or similar charge has been disallowed as a result of differing interpretations of reasonableness, it will allow the recipient of the fee to refund the disallowed amount and accept a written request from the recipient to reduce the recipient's income accordingly.  Where in a cross-border context, the finding by CRA that the fee was excessive would otherwise give rise to an assessment of Part XIII tax on a deemed dividend, the non-resident may repatriate the excess amount to avoid the withholding tax assessment.

Scott Armstrong.  Summaries of 19 October 2012 T.I. 2012-0440071E5 under s. 67 and s. 214(3)(a).