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04 Understanding tax specifics

Transfer pricing

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Transfer pricing arrangements between subsidiaries of a multinational company may have a direct impact on taxes payable.

Transfer prices reflect the value of the goods and services traded between subsidiaries that belong to the same organization but are located in different countries. This is an essential consideration that has a direct impact on how a company’s taxes are calculated.

To keep businesses competitive and prevent tax evasion, Canadian laws are consistent with OECD guidelines, which rely on the arm’s length principle:

  • Transfer pricing must reflect market conditions, i.e., prices must be comparable to what two independent companies would charge in a similar situation.
  • In cases where there is no equivalent market, the methodologies developed by the OECD must be used.
  • Businesses must provide documentation to demonstrate that their taxable income is not transferred artificially to another country.

Montréal International can help you find qualified specialists who will help you navigate this aspect of international taxation.

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Alexandre Lagarde

Vice President, Foreign Investment