Rules referencing OECD guidelines may expand somewhat the OECD influence on ITA interpretive questions

Current or draft ITA rules referencing OECD guidelines now include:

• s. 270(2), which specifies that the provisions in Pt. XIX are to be interpreted consistently with the common reporting standard rules published by the OECD, unless the context otherwise requires
• similar provisions in the anti-hybrid mismatch rules, the draft reporting rules on digital platform operators and the Pillar 2 implementation legislation.

Although this by itself would not have much impact (Canada’s tax treaties are interpreted in light of the OECD commentaries where relevant, without a specific provision to that effect), what is more significant is that these rules refer to the relevant OECD recommendations “as amended from time to time” – which raises the possibility of an interpretive expansions of the rules in the Act through OECD later-in-time materials.

Somewhat conversely, s. 247(2.03) of the draft transfer-pricing rules refer to them being “applied” (not “interpreted”) so as to achieve consistency with the 2022 OECD transfer pricing rules. This seems to direct “the CRA to use a particular vintage of the OECD transfer-pricing guidelines in the application of Canada’s transfer-pricing rules.”

Given the exception in s. 247(2.03) for where “the context otherwise requires,” Canadian courts may not confirm such application where, for instance, they consider that it departs from the arm’s-length principle.

Neal Armstrong. Summary of Michael Kandev, “Interpretation or Delegation: The Increasing Prevalence of Formal References to OECD Materials,” International Tax Highlights, Vol. 2, No. 3, August 2023, p. 9 under ITA s. 247(2.03).