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Earlier this year, Canada Border Services Agency (CBSA) announced a new approach to Transfer Pricing (the valuation method for determining the price paid or payable for trade between related parties) that has multiple implications in terms of refunds, payments of duties and taxes and Administrative Monetary Penalty System (AMPS) penalties.
- Refunds (on dutiable shipments) are now possible when there is a reduction in price paid or payable post import of dutiable goods.
- Duties and taxes could be applied on upward pricing adjustments as CBSA believes that these amounts are part of the Value for Duty (VFD) of imported goods.
- The new approach to Transfer Pricing penalties comes into play if an importer of duty free items (e.g. books) fails to submit voluntary adjustments, reflecting downward price reductions occurring after importation.
The CBSA’s existing Directive Memorandum D13-3-6 “Income Tax Transfer Pricing and Customs Valuation” from 2006 is expected to be revised to reflect the CBSA’s new position.
Need help to determine how these changes impact your existing Transfer Pricing agreements? Call Brian Rowe, General Manager – Customs Consulting Services at (905) 882-4880, ext. 213.
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