Tax Court of Canada Significantly Reduces Assessment to Printed Circuit Board Maker

OTTAWA — The Canada Revenue Agency over-assessed a custom circuit board manufacturer’s income by nearly C$2.7 million (US$2.7 million) for 1999-2001 by using the wrong method to determine the arm’s-length value of setup fees paid by the manufacturer to a related offshore company, the Tax Court of Canada ruled April 29. [Alberta Printed Circuits Ltd. v. The Queen, Tax Court of Canada, No. 2008-714(IT)G, 04/29/11]

The federal tax agency correctly found that the purchases of setup and other services by Alberta Printed Circuits Ltd. from the provider, Barbados-based APCI Inc., were not at arm’s length, but then incorrectly used the transactional net margin method (TNMM) to determine the appropriate transfer price when there was sufficient evidence to support the use of the much-preferred comparable uncontrolled price (CUP) analysis, Tax Court Judge Frank J. Pizzitelli said in the ruling…

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