Canada - Local Requirements – Aibidia

Source:

Income Tax Act (R.S.C., 1985, c. 1 (5th Supp.)), Section 247, last amended 28 May 2026
CRA Transfer Pricing Memorandum TPM-05R2

Summary of local requirements

Strict Format: Not specified

Language: English or French

To download the legislation in the original language, go to:

Transfer Pricing Documentation

Canada does not prescribe a formal Master File or Local File structure. Documentation requirements are defined under Section 247(4) of the Income Tax Act, which sets out what a taxpayer or partnership must make or obtain on a contemporaneous basis in order not to be deemed to have failed to make reasonable efforts to determine and use arm's length transfer prices or arm's length allocations. A taxpayer or partnership is deemed not to have made reasonable efforts unless it:

(a)	Makes or obtains, on or before the taxpayer's or partnership's documentation-due date for the taxation year or fiscal period in which the transaction is entered into, records or documents that provide a description that is complete and accurate in all material respects of:
(i)	the property or services to which the transaction or series relates,
(ii)	the contractual terms of the transaction or series and their relationship, if any, to the contractual terms of each other transaction or series that is relevant to the transaction or series and that involves at least one of the participants or any other member of the multinational enterprise group,
(iii)	the identity of the participants and their relationship to each other at the time the transaction or series was entered into,
(iv)	the functions performed by each of the participants in the transaction or series, based on their actual conduct, taking into account (A) assets used and risks assumed, (B) how those functions relate to the wider generation of value by the multinational enterprise group to which the participants belong, (C) circumstances surrounding the transaction or series, and (D) industry practices,
(v)	the data and methods considered and the analysis performed to determine amounts that are based on arm’s length conditions and to select and apply the most appropriate method in accordance with the Transfer Pricing Guidelines in respect of the transaction or series, and
(vi)	the economic circumstances, assumptions, policies and business strategies, if any, that influenced the determination of the amounts that are based on arm’s length conditions in respect of the transaction or series.
(b)	For each subsequent taxation year or fiscal period, if any, in which the transaction continues, makes or obtains, on or before the documentation-due date for that year or period, records or documents that completely and accurately describe each material change in the year or period to the matters referred to in any of subparagraphs (a)(i) to (a)(vi) above in respect of the transaction; and
(c)	Provides the records or documents described in paragraphs (a) and (b) to the Minister within 30 days after service, made personally or by registered or certified mail, of a written request therefor.

Recommendations for Documentation

Regarding content requirements:

Contemporaneous Preparation:

Canada requires that all documentation be prepared or obtained on or before the documentation-due date — defined as six months after the end of the taxpayer's taxation year. Documentation that is prepared after this date does not satisfy the Section 247(4) requirement, even if it is accurate and complete.

We recommend ensuring all TPDoc documentation is finalised and locked before the documentation-due date (i.e., six months after the entity's taxation year end), and saving a dated, version-controlled export from TPDoc as evidence of contemporaneous preparation.
Material Changes in Subsequent Years:

Canada requires that for each subsequent year in which a transaction continues, the taxpayer must prepare or obtain records that completely and accurately describe each material change to any of the Section 247(4)(a)(i)–(vi) matters. This is a rolling annual update obligation.

We recommend reviewing and updating the relevant sections of the TPDoc Local File at the start of each new documentation cycle, explicitly noting and documenting any material changes to the transaction terms, FAR profile, methods, assumptions, or policies compared to the prior year.
Assumptions, Strategies, and Policies:

Canada specifically requires documentation of the assumptions, strategies, and policies that influenced the determination of transfer prices — including group-wide pricing policies, business strategies, and any special circumstances such as market penetration strategies or start-up losses.

We recommend documenting all relevant pricing assumptions, business strategies, and group TP policies in the Application Assumption column within the Methods tab of the corresponding Reporting Level, and cross-referencing any group-level policies documented in the Group Description tab of the Group section.

Regarding format/structural requirements:

Canada does not prescribe a strict standardised template for transfer pricing documentation.

We recommend preparing the transfer pricing documentation using TPDoc's standard Local File functionality, ensuring it is finalised before the documentation-due date and maintained in a format readily accessible for CRA review.