Advance pricing agreements


Does the country have an advance pricing agreement (APA) programme? If so, is the programme widely used? Are unilateral, bilateral and multilateral APAs available?

An advance pricing arrangement (APA), being a formal arrangement between a taxpayer and the minister of national revenue in respect of cross-border transactions between non-arm’s-length persons, is possible in Canada. Under the APA, taxpayers may confirm with the minister the appropriate transfer pricing method and its application to the specific transaction.

The Canada Revenue Agency (CRA) may enter into unilateral, bilateral and multilateral APAs, although the latter arrangements are more common. The benefit of proceeding with a bilateral and multilateral APA is that it minimises the changes of double taxation if a foreign administrator disagrees with the Canadian approach.

In its 2017 APA programme report, the CRA noted that the transactional net margin method was the predominate methodology used in APAs (2017 APA Program Report).

The benefits of an APA in Canada are not unique. It provides certainty to taxpayers with respect to the tax outcome of their cross-border transactions and it minimises audit activity and audit threats relating to the transactions covered by the APA, which may result in costs savings over the term of the agreement. The principal disadvantage is that it is a lengthy process and requires upfront investment of taxpayers’ resources.


Describe the process for obtaining an APA, including a brief description of the submission requirements and any applicable user fees.

To initiate the process for an APA, an information package must be submitted to the CRA, which typically consists of information about:

  • the multinational enterprise group;
  • its industry;
  • its transactions;
  • its transfer pricing history;
  • the proposed transfer pricing methods;
  • the multinational enterprise group’s financial statements; and
  • the reason for the APA request.
Time frame

How long does it typically take to obtain a unilateral and a bilateral APA?

The typical timeframe to conclude an APA is three to four years. Based on the 30 bilateral APAs closed in 2017, the CRA reported that APAs took an average of 48.5 months to complete from acceptance to completion.

Three stages are involved in the process. During the first stage, the taxpayer meets with the CRA within 180 days of the end of the first taxation year that is to be covered by the APA. After this meeting, the taxpayer can make a formal request to enter into the APA programme. Once the taxpayer is accepted into the programme, the CRA reviews the taxpayer’s submitted information package and may request additional information. The CRA prepares a paper setting out its views on the covered transactions and the appropriate transfer pricing methodology. During the second stage, the CRA negotiates with the foreign government if there is a bilateral or multilateral arrangement. The taxpayer is generally not engaged in this negotiation process. The final stage involves execution of the APA between the CRA and the taxpayer, as well as the documentation and execution of a bilateral or multilateral understanding between the CRA and the foreign tax administration body.


How many years can an APA cover prospectively? Are rollbacks available?

Taxpayers should set out in the application what is their preferred duration for which the advanced pricing agreement would apply. APAs are generally made for a five-year period. Rollbacks are available in certain circumstances.


What types of related-party transactions or issues can be covered by APAs?

The APA process is designed to produce an APA specifying:

  • the nature and scope of transactions to be covered; and
  • the appropriate transfer pricing methodology to be employed.

Accordingly, all related party transactions and arrangements between a taxpayer and a non-resident entity may be covered by an advanced pricing agreement.


Is the APA programme independent from the tax authority’s examination function? Is it independent from the competent authority staff that handle other double tax cases?

The Competent Authority Services Division manages the Canadian advance pricing arrangement programme. It is located in the Compliance Programmes Branch within the International and Large Business Directorate of the Canada Revenue Agency (CRA). The Competent Authority Services Division also works closely with (and may borrow employees from) the International Tax Division and the Income Tax Rulings –branches of the CRA. The Competent Authority Services Division does not exercise examination functions but should not be considered independent from examination divisions, as it may employ and interact with members of the examination function divisions. In addition, employees of the Competent Authority Services Division handle both the APA programme and other international tax functions, such as the application of the mutual agreement procedure. Accordingly, the employees of the Competent Authority Services Division may be aware of transfer pricing audit risks and issues.

Advantages and disadvantages

What are the key advantages and disadvantages to obtaining an APA with the tax authority?