Transfer Pricing guide: Canada
Read below for more detailed information on transfer pricing regulations, document requirements, and other considerations for Canada, as well as recent industry hot topics and key developments in the country's business landscape.
Page updated 1st July 2026
Transfer Pricing regulations
Is the jurisdiction part of OECD/G20 Inclusive Framework on BEPS?
Yes.
Relevant Transfer Pricing regulation
Canadian Income Tax Act (ITA) section 247.
Is this regulation aligned with the OECD Guidelines
Yes.
Transfer Pricing documentation requirements
Documentation Threshold for Preparation of Local File/ TP Documentation
No threshold, all taxpayers who enter into transactions or series of transactions with non-arm’s length non-residents must have transfer pricing documentation.
Documentation Threshold for Preparation of Master File
No threshold, all taxpayers who enter into transactions or series of transactions with non-arm’s length non-residents must have transfer pricing documentation.
Documentation Threshold for Preparation of Country by Country Report
No threshold, all taxpayers who enter into transactions or series of transactions with non-arm’s length non-residents must have transfer pricing documentation.
Submission of Local File, Master File, and CbC Report Required? If so, when?
No filing requirement of the TPM documentation, however taxpayers are required to provide the documentation within 90 days of request from CRA.
If No Submission Required, any Other Deadline?
See above.
Other Documentation Requirements
Documentation must be contemporaneous.
Does TP documentation / Local file Need to be Prepared Contemporaneously with Tax Return Filing (i.e., before filing the return)?
Yes but it is not submitted with the return, only provided upon request.
Transfer Pricing Specific Returns
Preparation of TP Return Required?
Yes, annual filing of T106 Information Return of Non-Arm's Length Transactions with Non-Residents where gross transactions with related non-residents is in excess of $1,000,000.
Deadline for TP Return Filing
Same deadline as the annual tax filing of the taxpayer, 6 months from year end for corporation, 4 to 5 1/2 months for individuals.
Key information to be included in the TP Return
Disclosure of transaction types (e.g. sale of goods, services, intangibles, loans). Income/expense items must disclose transfer pricing methodology. Declaration of whether contemporaneous TPM documentation is complete and if it has changed in the period.
Benchmarking - Local Tax Authority Preferences
Local vs Regional Comparables Set
The CRA does not have a strict, legislated preference for either local or regional benchmarking results when determining appropriate transfer pricing methodologies for cross-border non-arm’s length transactions. Where local comparables are available and provide a high degree of comparability, they may be preferred. However, if local comparables are not available or are not sufficiently reliable, regional or even global comparables may be used, provided that appropriate adjustments are made to account for differences.
Single-Year vs Multi-Year Analysis
Single-year is preferred however multi-year may be accepted.
Public vs Private Comparables
No preference.
Interquartile Range or Full Range
No preference.
Transaction-Based or Aggregate Approach, or Both
Transaction-based is preferred however aggregate approach may be accepted.
How Often are Benchmarking Sets Renewed (financial update versus full scope BMS preparation)
The CRA requires that benchmarking studies supporting transfer pricing analyses be updated annually to ensure that the data and comparable used are relevant to the specific tax year under review.
TP Penalties
In Case of Delayed Submission of Documentation
Late submission of T106 is subject to $25/day for each non-resident entity to a maximum of $2,500 per non-resident entity.
In case of Income Adjustments in Course of a Tax audit
The penalty is 10% of the net amount of transfer pricing adjustments made under subsection 247(2) that exceed the lesser of $5,000,000 or 10% of the taxpayer’s gross revenue for the year.
Other Considerations
APA & MAP Availability
Bilateral and multilateral APA opportunities are available. Unilateral APAs can be available for a non-treaty jurisdiction where the transactions are not material enough to justify a bilateral or multilateral APA.
A MAP request can be made with CRA when the taxpayer believe that actions of one or both treaty countries result or will result in taxation not in accordance with the provisions of the relevant tax treaty.
Applicability of Safe Harbour Rules
No safe harbour rules.
Critical Transfer Pricing Issues Prevailing in the Jurisdiction, if any
No specific mandates or focus. Mostly addressing BEPS-related risks, including profit shifting and hybrid mismatches.
Criteria/ Guidelines for Transfer Pricing Audit/ Assessments by Tax Authority
CRA uses a risk-based approach to audit selection.
Relevant Regulations and Rulings with Respect to Thin Capitalization or Debt Capacity in the Jurisdiction
Interest related to non-arm's length non-resident debt is non deductible if the debt exceeds 1.5 of equity of the Canadian resident. Can be considered as a dividend and subject to withholding tax.
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The Canada Revenue Agency (CRA) uses a risk-based approach to audit selection
Audits are typically selected from taxpayers filing annual T106 Information Return of Non-Arm's Length Transactions with Non-Residents where gross transactions with related non-residents is in excess of $1,000,000. After audit selection, TPM documentation must be provided within 90 days of request.
Bilateral and multilateral APA opportunities are available. Unilateral APAs can be available for a non-treaty jurisdiction where the transactions are not material enough to justify a bilateral or multilateral APA.
A MAP request can be made with CRA when the taxpayer believe that actions of one or both treaty countries result or will result in taxation not in accordance with the provisions of the relevant tax treaty.
Alignment with OECD Guidelines
Canada has participated in the development of the BEPS action items and has supported the anti-treaty-shopping recommendations (Action 6), as well as other BEPS measures, including those on hybrid mismatch arrangements (Action 2), transfer pricing (Actions 8-10, 13), and dispute resolution (Action 14).
Canadian federal budgets have repeatedly referenced the BEPS project, with the government explicitly stating its commitment to implement BEPS recommendations in a manner that balances tax integrity and competitiveness. For example, Budget 2016 reaffirmed Canada’s commitment to the BEPS project, including participation in the development of a multilateral instrument to implement treaty-related BEPS recommendations and the introduction of country-by-country reporting for large multinational enterprises.
Canada is listed among the countries that have committed to the BEPS project and the development of the multilateral instrument (Action 15), which is a key component of the Inclusive Framework.
The Canada Revenue Agency (CRA) is an active participant in OECD tax work, including the Committee on Fiscal Affairs and its sub-bodies, and Canada is involved in the Forum on Tax Administration, which supports the implementation of BEPS measures
Benchmarking Analyses Nuances or Preferences
The CRA does not have a strict, legislated preference for either local or regional benchmarking results when determining appropriate transfer pricing methodologies for cross-border non-arm’s length transactions. Where local comparables are available and provide a high degree of comparability, they may be preferred. However, if local comparables are not available or are not sufficiently reliable, regional or even global comparables may be used, provided that appropriate adjustments are made to account for differences
Thin Capitalisation Considerations for Intercompany Loans
Interest related to non-arm's length non-resident debt is non deductible if the debt exceeds 1.5 of equity of the Canadian resident. Can be considered as a dividend and subject to withholding tax.
