Case Study: How Bill C-15’s Transfer Pricing Rules Affect Canadian PMEs (Private Multinational Enterprises)

Bill C-15: What Changed in Transfer Pricing

Receving Royal Assent on March 26, 2026, Bill C-15 enacts several major tax measures including new transfer-pricing adjustment rules and documentation requirements effective for tax years beginning after November 4, 2025.(kpmg.com)

Under the new rules, Canadian taxpayers must analyze not just contracts but also other economically relevant characteristics when evaluating cross-border, non-arm’s-length transactions.(kpmg.com)

Implications for Private Multinational Enterprises (PMEs)

Here “Private Multinational Enterprises” refers to Canadian-controlled firms with foreign affiliates, or otherwise conducting international trade or service relationships with related parties. Key impacts:

• Greater substantiation required in transfer pricing studies—the “arm’s-length standard” now extends beyond just written contract terms to include business practices, risk allocations, and other economic factors.
• Documentation requirements will likely increase in breadth—companies must prepare disclosures to demonstrate compliance.
• Risk of adjustment if structures or operational realities differ from the written contract or standard documentation.

Example: Mid-Sized Canadian Manufacturer

A manufacturer in Ontario sells components to its affiliate in Mexico. Pre-Bill C-15, their written agreement sets a margin. Post-Bill C-15, CRA will examine:

• Whether manufacturing risk, IP ownership, supply chain functions are aligned with what's in documents.
• If, e.g., the Canadian side performs more of the value-added work or bears risks, but contracts don’t reflect this, CRA may require adjustments.

Action Plan for PMEs

1. Review existing TP arrangements to ensure they reflect actual operations: responsibility, IP ownership, and risk exposure must align with contract and conduct.
2. Update transfer pricing policies and manuals, ensuring that economically relevant characteristics are well documented.
3. Engage independent TP studies or advisors to review comparables and properly justify margins and risk.
4. Implement internal audits to catch misalignments proactively.
5. Budget for additional compliance costs: These rules may increase documentation, legal, or advisory expenses.

Broader Tax Planning Considerations

• Consider restructuring high-risk intercompany transactions well before the fiscal year after November 4, 2025.
• Align supply chain, production, or IP holding entities to reduce taxable transfer pricing adjustments.
• Evaluate whether existing oversights in contracts might expose the company to penalties or re-assessment.

Conclusion: Bill C-15’s expanded transfer pricing rules bring sharper scrutiny over cross-border dealings. Proactive alignment of operations, contracts, and documentation by PMEs will help avoid costly adjustments.