Canada: Court upholds foreign documents request in transfer pricing audit

Tax Controversy & Dispute Resolution ()

On March 20, 2013, Canada’s Federal Court issued its decision in Soft-Moc Inc. (Soft-Moc) v. M.N.R. 2013 FC 291, siding with the Minister of National Revenue and the Canada Revenue Agency (CRA) in its efforts to gather foreign information during a transfer pricing audit.

For Canadian taxpayers, this decision underscores the value of cooperating with queries through a transfer pricing audit and certain pitfalls faced when the typical tax audit process escalates to more formal information-gathering procedures. It may also embolden the CRA to continue an apparent recent trend of using formal requirement procedures more often, and earlier in the tax audit process.