CRA considers that s. 152(4)(b)(iii) permits a reallocation of taxable income among provinces where a taxpayer’s sales revenue has been increased under s. 247(2)

S. 152(4)(b)(iii) extends the normal reassessment period for an additional three years for reassessments made “as a consequence of” a transaction involving the taxpayer and a non-arm’s length non-resident.

A s. 247(2) transfer-pricing adjustment (“TPA”) was reassessed by CRA within the three years after the normal reassessment period to increase the sales proceeds on a cross-border sale. CRA then performed a provincial income allocation audit, also within the additional three-year period. The Directorate found that CRA was also authorized by s. 152(4)(b)(iii) to reassess so as to reallocate both the pre-TPA and additional TPA revenue among the provinces – apparently even though this might only affect relative provincial taxable income and not affect federal taxable income (given that the TPA reassessment had already occurred).

Neal Armstrong. Summary of 16 January 2017 Internal T.I. 2016-0651411I7 under s. 152(4)(b)(iii).