What’s New Under Section 247 (Bill C-15)
Canada has significantly revamped transfer pricing rules in the Income Tax Act: received Royal Assent on March 26, 2026, the changes apply to taxation years beginning after November 4, 2025. (canada.ca) Key shifts include:
- Introduction of a single operative adjustment rule, replacing old two-part system dividing traditional pricing adjustments and recharacterization, aligning closer with the OECD Guidelines. (canada.ca)
- Time to respond to CRA documentation requests slashed: you now have 30 days to provide contemporaneous documentation under subsection 247(4) (previously 3 months). (canada.ca)
- Higher thresholds before penalties apply: either $10 million or 10% of gross revenue, whichever is lesser. (canada.ca)
- Simplified documentation options when prescribed conditions are met, reducing audit burden for smaller transactions. (canada.ca)
Key Compliance Steps for Multinationals
- Review all existing inter-company agreements to ensure the actual terms and pricing align with the arm’s-length result; recharacterization risk is now part of the single adjustment approach.
- Update documentation processes: ensure that your systems capture all required comparables, functional analysis, and documentation early—and are ready to produce them within drafts of 30 days of request.
- Monitor revenue thresholds: if gross revenues approach penalty triggers, ensure more conservative transfer pricing practices and rigorous documentation.
Example Scenarios
- Example A: A Canadian subsidiary pays royalties to an overseas related entity. Under new rules, if the royalty rate deviates from what an independent party would pay, CRA may adjust payments under the single operative adjustment rule—earlier, only pricing or recharacterization paths existed.
- Example B: A group has gross revenue of $15 million. Previously low-level transactions might escape stringent documentation; under new rules, if revenue is above thresholds, you need full contemporaneous documentation or face penalties. If revenues under $10M, or less than 10% of total revenue, then relief may apply.
Audit Strategy and Risk Management
- Establish regular internal transfer pricing review schedules—don’t wait for an audit request.
- Maintain comparables documentation in advance—with industry-benchmarked data and functional profiles matching real operations.
- Train finance, legal, and transfer-pricing staff on the revised OECD 2022 Guidelines, because statutory interpretation must align with them.
Practical Timeline
| Task | Due Date / Effective | What to Do |
|---|---|---|
| Tax years starting Nov 5, 2025 onward | Already applying | Implement new rules retroactively where possible |
| Fiscal year-end reporting | Before your next return | Adjust disclosures, review existing positions |
| Documentation readiness | Now | Ensure your data and records make compliance feasible within required timeframes |
Takeaway: These rule changes tighten Canada’s transfer pricing regime considerably. Early preparation and strong documentation are the keys to managing risk and avoiding costly adjustments or penalties.