4 in the event that the notification referred to in

 4. In the event that the notification referred to in paragraph 3 is not given within the time period referred to
therein, and if the person to whom the first-mentioned adjustment relates has not received, at least six months
prior to the expiration of such time period, notification of such adjustment from the Contracting State which has
made or is to make such adjustment that State shall, notwithstanding the provisions of paragraph 1, not make the
first-mentioned adjustment to the extent that such adjustment would give rise to double taxation.
 5. The provisions of paragraphs 3 and 4 shall not apply in the case of fraud, willful default or neglect or gross
negligence.
CAN-UK Art 9
 (1) Where
o (a) an enterprise of a Contracting State participates directly or indirectly in the management, control or
capital of an enterprise of the other Contracting State, or
o (b) the same persons participate directly or indirectly in the management, control or capital of an
enterprise of a Contracting State and an enterprise of the other Contracting State,
 and in either case conditions are made or imposed between the two enterprises in their commercial or financial
relations which differ from those which would be made between independent enterprises, then any income,
deductions, receipts or outgoings, which would, but for those conditions, have been attributed to one of the
enterprises, but, by reason of those conditions, have not been so attributed may be taken into account in
computing the profits or losses of that enterprise and taxed accordingly.
Transfer Pricing Methods
 “Arms length principle” -> what would be charged if parties were AL? Meant to distribute tax revenue fairly
between jurisdictions
 The CRA position is generally based on the OECD Transfer pricing guidelines (really just an FMV test)
o h/e FMV test is contentious: hard to properly price intermediate goods / goods where no market price
available for comparison
 First 3 are “traditional”, last 2 are “profit split” methods

TRADITIONAL METHODS:
Comparable Uncontrolled Price (CUP)
 TEST: Is there a comparable market price?
o Works for simple products.
 Strict comparability
 Used where there is a comparable NAL product being bought or sold in similar quantities in and under similar
terms within similar markets
o Requires strict comparability (must be almost identical products)
o Judges seem to prefer this method (think it’s the most realistic), and are hesitant to move past it
Resale Price
 TP can subtract a gross profit mark up from the price that would have been sold to unrelated parties
 Used when the related part adds relatively little value to the goods
Cost Plus
 TP adds an appropriate profit percentage or mark-up to its costs of producing the product or service prior to a sale
of a related party
 Used where the related party purchases a good and adds value to it prior to resale
NON-TRADITIONAL:
Profit Spilt
 Split how much you made between the two companies in proportion to the contribution
o Use some sort of proxy (ie. Payroll, inventory) to determine where value is being added
Transactional Net Margin Method (TNMM)
 Similar to cost+ and resale price
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