Tax Treaty Case Law around the Globe 2018

S. 429Chapter 35 Canada: Transfer Pricing Adjustment after a Competent Authority Agreement: Sifto Canada Corp. v. The Queen

David G. Duff

35.1. Introduction

Is a transfer pricing settlement that was arrived at through a mutual agreement procedure (MAP) under a bilateral tax treaty binding on the revenue department? In an unusual set of circumstances that provide a revealing window on its own administrative deficiencies, the Canada Revenue Agency (CRA) argued in Sifto Canada Corp. v. The Queen that it was not bound by a competent authority agreement under the Canada-United States Income and Capital Tax Treaty (1980) (hereinafter Canada-US tax treaty). Not surprisingly, and appropriately, the Tax Court of Canada held that the settlement was binding under domestic and international law.

35.2. Facts of the case

The facts of the case involve a Canadian company called Sifto Canada Corporation (Sifto), which owns and operates the world’s largest underground salt mine, located in Goderich, Ontario. During the years at issue, Sifto was an indirect subsidiary of a publicly-traded US corporation called Compass Minerals International Inc. (Compass), and sold 50% of the rock salt that it produced to anoth...