When s. 247(10) discretion exercised
The Minister may decide not to exercise discretion under s. 247(10) where a Canadian company requests a decrease in the transfer price of sales to a non-arm's length non-resident without repatriation, and s. 15(1) does not apply to the amount. ("This situation may be considered abusive because the Canadian taxpayer has turned an otherwise taxable receipt of monies into a non-taxable amount.") Conversely, when a Canadian parent company requests and receive a decrease in the transfer price of sales to a non-resident subsidiary without repatriation, this is not considered abusive, because s. 15(1) would apply and offset the downward adjustment.
Effecting repatriation
Repatriation can be accomplished by:
- offsetting inter-company accounts receivable from the non-resident – It should be remembered that this method of repatriation might have an effect on other items. For example, interest charges may have to be adjusted on a going-forward basis to reflect the revised inter-company balances;
- the transfer of money or its equivalent to the non-resident corporation;
- where a Canadian parent company cannot otherwise effect repatriation within a reasonable time, the creation of a shareholders loan account – This would be effective at the date of the transfer pricing transaction and may result in the application of subsection 15(2) of the Act; or
- netting upward and downward transfer pricing adjustments from different non-residents if both the taxpayer and all the non-residents involved agree in writing to have the amounts offset... .