Principal Issues: 1. Whether an advance tax ruling issued to a taxpayer limits the Compliance Programs Branch from reassessing the taxpayer on subsequent transactions. 2. Whether the CRA remains bound by an advance tax ruling issued prior to the introduction of section 247. 3. Whether the expected yield to maturity of a debt instrument at the time the instrument was issued is appropriate when considering whether the arm's length standard has been met in the context of a transfer pricing analysis?
Position: 1. Where the subsequent transactions were not part of the ruling, no. 2. If the ruling can continue to be supported by new legislation, yes. 3. Yes.
Reasons: 1. A ruling is binding upon the CRA with respect to the recipient taxpayer and the described transactions, but does not limit the Compliance Programs Branch from reassessing subsequent transactions that were not part of the ruling and which are not those described in the ruling. 2. A ruling issued prior to the introduction of section 247 will remain binding as long as it can continue to be supported. 3. A proper application of the arm's length principle requires that regard be had for the economically relevant characteristics of the circumstances, which may include the interest rate set on a debt instrument at the time of its execution.
