At a glance
- Bill C-15 would modernize Canada’s transfer pricing rules and formally align them with OECD guidance.
- The CRA would gain expanded powers to recharacterize or disregard transactions.
- The documentation deadline would be reduced from three months to 30 days following a written request.
- Documentation requirements would expand to include a full analysis of economically relevant characteristics and substance.
- Penalty thresholds would increase to the lesser of $10 million or 10% of gross revenues.
Immediate proactive action items for corporate groups
Refresh functional analyses to highlight the actual conduct of the parties with respect to intercompany transactions, related decision-making authority, and economic substance.
Enhance existing contemporaneous documentation and the related processes to align with the expanded documentation requirements to ensure it is audit-ready and can withstand to be submitted within 30 days from the date of the Canada Revenue Agency’s, CRA’s, written request (previously a three-month submission deadline).
Review and revise intercompany agreements to ensure contractual terms reflect commercial reality.
Evaluate high risk structures, such as limited risk entities, IP licensing arrangements, charging of management fees, debt financing, and cost sharing.
Prepare for audit readiness, to effectively deal with the CRA’s greater discretion and expanded information powers.
Key updates to transfer pricing rules
The proposed amendments under Bill C-15 would modernize Canada’s transfer pricing rules and broaden the CRA’s powers. The changes focus on substance, expanded documentation, and stronger alignment with OECD guidance. You may need to reassess your current transfer pricing policies and supporting documentation.
Mandatory delineation-first framework
Bill C-15 embeds an OECD-aligned, two-step analytical process directly into the ITA:
Step 1 – Identify the actual conditions of the transaction
Taxpayers must assess economically relevant characteristics of the transaction including contractual terms, functional profiles, risk control, asset usage, economic context, and business strategies.
Step 2 – Compare those to arm’s length conditions
The CRA can challenge outcomes that differ from what independent parties would have agreed.
You may need enhanced functional analyses and evidence of actual conduct. Reliance solely on legal form may be more difficult to support, as the proposed rules emphasize substance over form.
Expanded recharacterization and adjustment powers
Bill C-15 allows the CRA to:
- Change the nature of payments (for example, recharacterizing service fees as royalties).
- Replace a controlled transaction with one that would have occurred between independents.
- Conclude a transaction would not have occurred at all under arm’s length conditions.
Previously the rules restricted the CRA’s ability to disregard or replace transactions.
You may need to further support and document your structures—particularly risk allocation, financing arrangements, cost-sharing arrangements, and intellectual property ownership—in anticipation of increased CRA scrutiny.
Consistency with OECD transfer pricing guidelines
Bill C-15 legislates the requirement that all aspects of Canadian transfer pricing be interpreted consistently with the OECD transfer pricing guidelines. Up until now, Canadian courts considered OECD guidance as persuasive but not legally binding.
You may experience increased scrutiny regarding:
- Options realistically available;
- Accurate delineation of risk;
- Control over economically significant decision making; and
- Profit allocations based on substance.
Expanded documentation requirements and tighter deadlines
Documentation requirements have expanded significantly:
- The deadline to provide the CRA with documentation is reduced from 3 months to 30 days following a written request from the CRA.
- Increased analyses of the economically relevant characteristics and delineation must be provided in the documentation.
You will require comprehensive documentation that can be delivered within 30 days of a written request. Failure to provide adequate documentation may increase the risk of a 10% transfer pricing penalty on a CRA-initiated adjustment upon reassessment.
Note: Bill C-15 introduces a simplified documentation regime for certain smaller taxpayers. The rules for simplified documentation have yet to be determined.
Increased transfer pricing penalty thresholds
The threshold for triggering transfer pricing penalties increases to the lesser of:
- $10 million in transfer pricing adjustments; or
- 10% of gross revenues.
Previously, the transfer pricing penalty threshold was the lesser of $5 million or 10% of gross revenues.
You may be subject to penalties if your gross revenues range between $50 million and $100 million. There is no change for companies with less than $50 million in revenues or revenues greater than $100 million.
Enhanced CRA audit powers
Bill C-15 strengthens the CRA’s ability to obtain information domestically and internationally, aligning with expanded authority highlighted in external analyses.
You should anticipate more expedited audits, broader information requests, and expanded use of formal requirements to produce documents.
Updated statutory definitions and technical amendments
Bill C-15 revises or replaces several definitions in section 247(1) of the ITA, including:
- Transfer pricing income adjustment;
- Transfer pricing income setoff adjustment; and
- Deletion of prior definitions such as arm’s length allocation and transfer price.
These changes support the proposed adjustment mechanism and expanded documentation expectations.
Canada’s expanded transfer pricing documentation requirements
Bill C-15 would significantly expand Canada’s contemporaneous transfer pricing documentation requirements. The proposed amendments go beyond pricing methodology and comparables, requiring a more detailed analysis of economically relevant characteristics and actual conduct. As a result, you may need to enhance both the scope and depth of your annual documentation.
What's changing
The legislation broadens contemporaneous documentation requirements and explicitly incorporates the documentation requirements described in the OECD guidelines.
Key difference from current rules
Documentation must now cover the full economically relevant characteristics analysis, not just pricing methodology and comparables.
Practical implications
Recommended actions
How BDO can help
Our transfer pricing professionals can help you assess how the proposed changes may affect your organization and support you in implementing practical next steps.
Contact us today
The information in this publication is current as of Feb.19, 2026.
This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO Canada LLP to discuss these matters in the context of your particular circumstances. BDO Canada LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.