If your foreign or U.S.-based parent prepares your Canadian transfer pricing (TP) documentation, how can you be sure it will meet Canada Revenue Agency (CRA) standards? A Canadian review will ensure that your documentation complies with Canadian guidelines and could even reduce issues arising on audit.
While preparing documentation from a global perspective is an effective process that allows for a consistent framework/message for all entities, foreign parents may focus their efforts on high-risk countries and transactions. This could leave Canadian-specific documentation at a level that might not meet the CRA’s “reasonable efforts” exception that allows you to avoid penalties in the event of a TP adjustment.
The CRA’s approach to TP documentation is different from that of many other tax authorities, including the Internal Revenue Service (IRS):