Advance Pricing Arrangements (APA) in Canada: Overview

By Robert Robillard - 10 July 2014

This blogpost originally appeared on

Paragraph 4.123 of the OECD Transfer Pricing Guidelines indicates:

“4.123 An advance pricing arrangement (“APA”) is an arrangement that determines, in advance of controlled transactions, an appropriate set of criteria (e.g. method, comparables and appropriate adjustments thereto, critical assumptions as to future events) for the determination of the transfer pricing for those transactions over a fixed period of time. An APA is formally initiated by a taxpayer and requires negotiations between the taxpayer, one or more associated enterprises, and one or more tax administrations. APAs are intended to supplement the traditional administrative, judicial, and treaty mechanisms for resolving transfer pricing issues. They may be most useful when traditional mechanisms fail or are difficult to apply. […].”

Paragraph 4.143 explains:

“4.143 APAs can provide an opportunity for both tax administrations and taxpayers to consult and cooperate in a non-adversarial spirit and environment. The opportunity to discuss complex tax issues in a less confrontational atmosphere than in a transfer pricing examination can stimulate a free flow of information among all parties involved for the purpose of coming to a legally correct and practicably workable result. The non-adversarial environment may also result in a more objective review of the submitted data and information than may occur in a more adversarial context (e.g. litigation). The close consultation and cooperation required between the tax administrations in an APA program also leads to closer relations with treaty partners on transfer pricing issues.”

Moreover, paragraphs 4.144 and 4.145 suggest:

“4.144 An APA may prevent costly and time-consuming examinations and litigation of major transfer pricing issues for taxpayers and tax administrations. Once an APA has been agreed, less resources may be needed for subsequent examination of the taxpayer’s return, because more information is known about the taxpayer. It may still be difficult, however, to monitor the application of the arrangement. […]”

“4.145 Bilateral and multilateral APAs substantially reduce or eliminate the possibility of juridical or economic double or non taxation since all the relevant countries participate. […] In addition, bilateral and multilateral APAs can enhance the mutual agreement procedure by significantly reducing the time needed to reach an agreement since competent authorities are dealing with current data as opposed to prior year data that may be difficult and time-consuming to produce.”

In Canada, paragraph 6 of the IC 94-4R International Transfer Pricing: Advance Pricing Arrangements (APAs)

“6. There is no legal requirement to enter into APAs. The CCRA (now CRA) provides them as an administrative service. The CCRA considers all requests for APAs that are in accordance with paragraph 11. APAs benefit both taxpayers and the CCRA. These benefits include long-term time savings, efficient resolution of recurring complex matters, greater certainty about transfer pricing issues, potential application of findings to past years, and the minimization of global risk.”

Robert Robillard, CPA, CGA, MBA, M.Sc. Econ.
Transfer Pricing Chief Economist, RBRT Inc.
514-742-8086; robert.robillard “at”

RBRT Inc. is all about transfer pricing. We specialize in transfer pricing. Our services include transfer pricing documentation, transfer pricing dispute resolution, advanced pricing agreement (APA), value chain management and TP planning, transfer pricing training. The information in this blog post is general information only. Data and information come from sources believed to be reliable but complete accuracy cannot be guaranteed. RBRT Inc. and the author are not responsible or liable for any error, omission or inaccuracy in such information. Readers should seek independent tax advice and tax counsel from RBRT Inc. as required.