Transfer pricing
Transfer pricing refers to the prices charged for goods, services, intellectual property and loans between related businesses, such as a Canadian company and its foreign parent or subsidiary. Tax law requires these prices to reflect what arm's length parties would agree to, so that profits are not shifted out of Canada to reduce tax.
How BC law treats it
Transfer pricing rules are federal, under section 247 of the Income Tax Act, RSC 1985, c 1 (5th Supp), and apply to transactions with non arm's length non residents. BC does not have its own transfer pricing legislation; BC income tax follows the federal base and is administered by the CRA.
What it means for your business
If your company deals with related companies outside Canada, keep contemporaneous documentation supporting your pricing.
Risks and common mistakes
Without contemporaneous documentation, a CRA transfer pricing adjustment can attract a substantial penalty in addition to the extra tax.
Browse the full Fulcrum Law Dictionary for related terms.
General information about British Columbia and Canadian law, current to October 2026. It is not legal advice.
