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The Impact of Transfer Price Adjustments on Customs Compliance

Posted January 21, 2014

Did you know that an importer may be required to amend its customs filings to reflect transfer price adjustments to import prices made for income tax purposes by a parent or other related company? Even if not required, the importer may wish to voluntarily amend the import price to claim a duty refund where a transfer pricing adjustment decreases the import price of dutiable goods.

In the modern global economy, many corporations carry on business domestically in their home countries, but transact business with other countries through related affiliates. For income tax purposes, these related companies must ensure that pricing between related entities reflects arm's-length transactions, in accordance with the OECD Guidelines (which have been incorporated into the Canadian Income Tax Act). In many cases, these obligations are satisfied through periodic transfer price adjustments. These adjustments are generally recorded as paper/electronic transactions in corporate accounting records, with no actual transfer of funds involved.

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Source: Geoffrey C. Kubrick & Jamie M. Wilks | McMillan LLP