In practice, where CRA concludes that there should be recharacterizion under ss. 247(2)(b) and (d), it considers itself to be implicitly finding that the taxpayer’s documentation of the transaction is willfully dishonest.
The Transfer Pricing Review Committee is chaired by the Director of the International Tax Division, and its members include all the managers in that Division, and representation from Justice. Most TPRC meetings concern s. 247(3), and some concern s. 247(4).
Recharacterization under s. 247(2)(d) entails a three-step process. First audit staff make a submission to the TPRC. If accepted, the taxpayer is notified.
The audit team then conducts more research on the matter, and makes a second submission to the TPRC, and a second review determines whether the auditor should be able to propose an adjustment under ss. 247(2)(b) and (d). The taxpayer is then notified and allowed to make a submission..
At the third stage, the TPRC meets, along with representatives from Justice, Abusive Tax Avoidance, and Finance, to make a final recommendation.