FCA appeal settled.
The taxpayer sold receivables to its Luxembourg parent (MIH) at over twice the discount which could be supported under s. 247(2)). CRA assessed the taxpayer to reduce its income under Part I within the five-year period referred to in Art. 9, para. 3 of the Canada-Luxembourg Treaty but did not assess the taxpayer for failure to remit Part XIII tax on the correlative s. 214(3)(a) benefit to MIH until beyond the five-year period. Boyle J found that this assessment under s. 215(6) was not barred by Art. 9:
- It was questionable whether it represented a change by Canada of MIH's income, or constituted Canada seeking to add a transfer pricing adjustment amount to MIH's income and tax that increased amount. S. 215(6) instead represented an enforcement and collection provision.
- While the amount of MIH's taxable benefit and deemed dividend might be the same as the transfer pricing adjustment to the taxpayer, it is not an amount of income that, had there been an arm's length discount rate, would have accrued to MIH. On the contrary, it was income that but for the non-arm's length terms and conditions would have accrued to the taxpayer.