CRA Transfer Pricing Audit — Montreal CPA Firm Near You: OECD-Aligned Defense Files

A CRA Transfer Pricing Audit focuses on whether transactions between related companies — especially across borders — are priced at fair market value. When Canadian subsidiaries or parent corporations trade goods, services, royalties, or financing with related entities abroad, the CRA requires proof that these prices are set at “arm’s length.”
Mackisen CPA Montreal prepares OECD-compliant defense files and contemporaneous documentation that meet the standards under Section 247 of the Income Tax Act, ensuring your company’s intercompany pricing is fully defensible in Canada and internationally.

Legal Foundation

Law: Income Tax Act s. 247 — governs transfer pricing adjustments and penalties; OECD Transfer Pricing Guidelines (2022) — sets international documentation standards.
Jurisprudence: GlaxoSmithKline Inc. v. Canada (2012 SCC) — confirmed that transfer pricing must reflect economic substance, not just contractual terms.

Learning insight: CRA doesn’t judge your contracts — it judges your comparables. Mackisen CPA ensures both are legally sound and economically justified.

Why CRA Conducts Transfer Pricing Audits

CRA’s International and Large Business Directorate targets corporations with cross-border relationships, high intercompany flows, or complex financing structures. Typical triggers include:

• Service, royalty, or management-fee payments to related parties abroad.

• Low-margin subsidiaries in high-tax jurisdictions.

• Shared intellectual property or R&D cost-sharing arrangements.

• Loans between foreign and Canadian affiliates without documented rates.

• Persistent losses inconsistent with industry standards.

Learning insight: CRA’s algorithm doesn’t audit randoms — it audits ratios. Mackisen CPA balances your numbers before CRA questions them.

What a Mackisen CPA Transfer Pricing Defense File Includes

1. Functional Analysis: Detailed review of functions, assets, and risks for each entity.

2. Comparable Benchmarking: Identification of comparable arm’s-length companies under OECD guidelines.

3. Economic Analysis: Justification of margins, markups, and royalty rates with reliable data.

4. Legal and Accounting Reconciliation: Tie transfer pricing results to T2 filings and financial statements.

5. Penalty Defense: File contemporaneous documentation to avoid 10% s.247(3) penalties.

Learning insight: Transfer pricing isn’t about guessing a number — it’s about proving a principle.

Common Transfer Pricing Audit Risks

• Using outdated or unrelated comparables.

• Missing contemporaneous documentation within the 6-month rule.

• Double taxation when foreign and Canadian authorities make conflicting adjustments.

• Improper allocation of head-office management fees.

• Non-market intercompany loan rates.

Mackisen CPA Montreal eliminates these risks by aligning your defense file with OECD principles and CRA administrative guidance.

Learning insight: CRA doesn’t penalize the wrong rate — it penalizes the missing evidence.

How CRA Conducts Transfer Pricing Audits

CRA auditors analyze multi-year financial data, cross-border invoices, and tax filings to assess consistency between profit margins and market standards. Once red flags arise, the CRA can issue a “Transfer Pricing Review Letter” or initiate a full audit requiring documentation within 3 months.

CRA expects to see:

• A complete functional and risk analysis.

• Independent comparable pricing studies.

• Consistent accounting policies across entities.

• Proof of services, contracts, and deliverables.

Learning insight: Transfer pricing audits are about story consistency — every number must match the narrative of a real transaction.

Mackisen CPA’s Audit Defense Process

1. Conduct a Transfer Pricing Risk Assessment identifying vulnerable transactions.

2. Rebuild or update your OECD Master and Local Files with current comparables.

3. Coordinate with legal counsel to draft intercompany agreements that support pricing.

4. Prepare economic summaries with industry benchmarks for each jurisdiction.

5. Negotiate directly with CRA’s Transfer Pricing Review Committee to minimize adjustments.

Learning insight: CRA only challenges undocumented logic — Mackisen CPA replaces logic with law, data, and precision.

SEO Optimization and Educational Value

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Secondary Keywords: CRA s.247 penalty, multinational tax audit, transfer pricing defense, arm’s-length pricing file, CRA international compliance.

Learning insight: In transfer pricing, compliance is not paperwork — it’s your passport to global credibility.

Real Client Success

• A Montréal-based pharmaceutical group avoided a $2.3 million reassessment after Mackisen CPA proved OECD-compliant comparables using GlaxoSmithKline methodology.

• A software company with affiliates in the U.S. and Ireland reduced CRA adjustments by 85% after we rebuilt its transfer pricing file and reclassified management fees.

• A manufacturing exporter secured Advanced Pricing Agreements (APA) with CRA and the IRS, eliminating future cross-border disputes.

Learning insight: Strong transfer pricing files turn negotiation into collaboration.

Why Mackisen CPA Montreal

Mackisen CPA Montreal has more than 35 years of audit and tax-law experience, specializing in international taxation, cross-border structures, and corporate compliance. Our bilingual CPAs and economists prepare OECD-aligned documentation that satisfies CRA’s Large Business Audit Division and international partners under BEPS standards.
We protect your corporation’s credibility in every jurisdiction — from documentation to negotiation.

Learning insight: CRA respects consistency, not complexity. Mackisen CPA makes global pricing simple, defensible, and transparent.