The likely CRA policy is that COVID-19 assistance should not reduce costs for transfer-pricing purposes

TPM-17 states that where a Canadian taxpayer receives government assistance and participates in a cross-border controlled transaction, it should not share any part of that assistance with non-arm's-length non-resident persons. For example, if the policy of a Canco performing research and development in Canada for its foreign parent is to charge the parent the total cost of this work plus a 10% markup, it would appear that COVID-19 government assistance received by it should (per TPM-17) not reduce its costs for the purposes of computing this 110% charge, so that the assistance generally would increase its Canadian taxable income.

It is suggested:

Where a Canadian taxpayer plans to directly or indirectly share all or part of the COVID-19 government assistance with a non-arm's-length non-resident person by way of reducing its allocable cost or markup, it should perform an in-depth economic analysis to develop support for this approach. In other words, it should have documentation that shows that the prices charged reflect arm's-length prices … .

Neal Armstrong. Summary of Nakul Kohli, “Sharing COVID-19 Assistance with Foreign Entities Through Transfer Pricing,” COVID-19 and Canadian Tax for the Owner-Manager/Canadian Tax Focus (Canadian Tax Foundation), July 2020, p. 5 under s. 247(2)(a).