What transfer pricing documentation does the CRA require, and how fast do we have to hand it over now?
For tax years beginning after November 4, 2025, ITA subsection 247(4) requires transfer pricing documentation for each related nonresident transaction by the T2 due date, handed to the CRA within 30 days of a written request. Without them, a 10% penalty applies once net adjustments exceed the lesser of $10 million and 10% of gross revenue.
What changed with Bill C-15, and which years does it cover?
Bill C-15, the Budget 2025 Implementation Act, No. 1, received Royal Assent on March 26, 2026, and the CRA says the new transfer pricing rules apply to taxation years beginning after November 4, 2025 canada.ca. Two documentation numbers moved: the time to produce records fell from 3 months to 30 days, and the dollar cap in the penalty threshold doubled from $5 million to $10 million
budget.canada.ca.
| Rule | Years beginning after November 4, 2025 | Earlier years |
|---|---|---|
| Records must exist by | Documentation due date (the T2 filing due date) | Same |
| Time to hand records to the CRA after a written request | 30 days | 3 months |
| Dollar cap in the penalty threshold | $10,000,000 | $5,000,000 |
| Penalty threshold | Lesser of $10,000,000 and 10% of gross revenue | Lesser of $5,000,000 and 10% of gross revenue |
| Simplified documentation | Draft regulations, years beginning on or after January 1, 2026 | Not available |
A corporation with a calendar year end is still on the old rules for its 2025 year, because that year began January 1, 2025. Its first year under the 30 days and the $10 million cap is the year that began January 1, 2026. A year that began November 1, 2025 is also on the old rules.
The deadline to prepare the records didn't move. The Budget text says the requirement to make or obtain them by the documentation due date stays unchanged; only the production window shrank budget.canada.ca.
What must the contemporaneous documentation describe?
Subsection 247(4) deems your client not to have made reasonable efforts to use arm's length amounts unless, by the documentation due date for the year the transaction is entered into, it has records that describe six matters completely and accurately in all material respects laws-lois.justice.gc.ca.
| ITA reference | What the records must describe |
|---|---|
| 247(4)(a)(i) | The property or services the transaction relates to |
| 247(4)(a)(ii) | The contractual terms, and how they relate to other relevant transactions involving the participants or the wider multinational group |
| 247(4)(a)(iii) | Who the participants are and how they were related when the transaction was entered into |
| 247(4)(a)(iv) | The functions each participant performs based on actual conduct, taking into account assets used, risks assumed, how the functions relate to the group's value creation, the circumstances and industry practices |
| 247(4)(a)(v) | The data and methods considered, and the analysis used to select and apply the most appropriate method under the Transfer Pricing Guidelines |
| 247(4)(a)(vi) | The economic circumstances, assumptions, policies and business strategies that influenced the arm's length amounts |
| 247(4)(b) | For each later year the transaction continues: every material change, documented by that year's due date |
| 247(4)(c) | Delivery to the CRA within 30 days after a written request is served personally or by registered or certified mail |
For a corporation, the documentation due date is its filing due date laws-lois.justice.gc.ca. That's six months after the end of the tax year, so a December 31 year end has until June 30
canada.ca. For a partnership, it's the date its partnership information return is due. See the T2 filing deadline page for the date table.
The Transfer Pricing Guidelines referred to in the Act are the OECD Transfer Pricing Guidelines as adopted on January 7, 2022, unless another text is prescribed laws-lois.justice.gc.ca.
How is the transfer pricing penalty calculated?
The penalty under subsection 247(3) is 10% of your client's net transfer pricing adjustments for the year, after removing adjustments on transactions where it made reasonable efforts, and it applies only when that net amount exceeds the lesser of 10% of gross revenue and $10,000,000 laws-lois.justice.gc.ca. Once the threshold is crossed, the 10% applies to the whole net amount, not just the excess.
| Step | Large group | Smaller group |
|---|---|---|
| Gross revenue | $300,000,000 | $60,000,000 |
| CRA transfer pricing adjustment, no reasonable efforts shown | $14,000,000 | $8,000,000 |
| 10% of gross revenue | $30,000,000 | $6,000,000 |
| Threshold: lesser of 10% of revenue and $10,000,000 | $10,000,000 | $6,000,000 |
| Adjustment exceeds threshold? | Yes | Yes |
| Penalty: 10% of the adjustment | $1,400,000 | $800,000 |
The smaller group shows the trap: its threshold is $6,000,000, not $10,000,000, because 10% of its revenue is lower. If either corporation had records meeting 247(4) and showing reasonable efforts, those adjustments would drop out of the calculation and the penalty would be nil. The adjustment itself, and the tax on it, would still stand.
The penalty is computed on the adjustment, not on the tax it produces, so a corporation with losses can still owe it.
What is the simplified documentation regime?
New subsection 247(4.1) switches off the full 247(4) requirement when your client meets prescribed conditions and prepares prescribed documentation laws-lois.justice.gc.ca. The conditions were released in draft on July 23, 2026, covering small taxpayers and partnerships, small transfers of tangible property, small intragroup services and small loans, with comments due September 4, 2026
canada.ca.
| Draft section | Who or what qualifies | Threshold |
|---|---|---|
| 9801 | All related nonresident transactions of a small taxpayer or partnership | Gross revenue of the taxpayer and its Canadian group members of $25,000,000 or less in the preceding year, no intangible property sold to a related nonresident and no royalties paid or received |
| 9802 | Sales or purchases of tangible property | $5,000,000 or less in the year |
| 9803 | Intragroup services provided or received | $2,000,000 or less in the year |
| 9804 | Loans to or from a related nonresident | $1,000,000 or less of interest in the year |
Each category needs an election in prescribed form by the documentation due date, and the records are lighter but not optional: terms, participants, amounts and the analysis showing the amounts are arm's length, still produced within 30 days of a request. The draft applies to years beginning on or after January 1, 2026, and an avoidance rule denies the regime if one purpose of a transaction is to benefit from it canada.ca.
As of October 2026 these are draft regulations. They do not yet appear in the consolidated Income Tax Regulations, so prepare full 247(4) records unless the rules are finalized before your client's documentation due date.
Edge cases accountants hit
Domestic related party transactions are outside section 247. The adjustment rule applies only when a nonresident the taxpayer doesn't deal with at arm's length is a participant laws-lois.justice.gc.ca.
The CRA's transfer pricing memoranda, including TPM-05R2 on contemporaneous documentation, predate the amendments. The CRA says it will issue updated memoranda on a priority basis over the coming months canada.ca. Where an old memorandum says 3 months, the Act now says 30 days.
The T106 is a separate obligation. A reporting person files the information return when its transactions with related nonresidents total more than $1,000,000 for the year, due by its filing due date laws-lois.justice.gc.ca. Filing a T106 does not satisfy 247(4), and good documentation does not replace a T106. See the T106 filing requirements page.
The 30 days is short for a file that has to be built from scratch. Since the records must already exist by the due date, the practical test at year end is whether you could hand the CRA a complete package within a month of a request letter.
Sources
Can my client prepare the documentation after the CRA asks for it?
No. The records must be made or obtained by the documentation due date for the year; the 30 days only covers delivery, and records created after the due date don't count toward reasonable efforts under 247(4) laws-lois.justice.gc.ca.
Does a December 31, 2025 year end use the 30 days or the 3 months?
The 3 months. That year began January 1, 2025, before the November 4, 2025 cutoff, so the old production window and the $5 million cap still apply to it canada.ca.
Is the simplified regime law yet?
Not as of October 2026. Finance released the draft regulations on July 23, 2026 and comments closed September 4, 2026, so treat the $25 million, $5 million, $2 million and $1 million tests as proposals until they are finalized canada.ca.
Does the penalty apply to a corporation with no tax owing?
Yes. Subsection 247(3) bases the penalty on the net transfer pricing adjustment, not on tax payable, so a loss corporation that crosses the threshold without reasonable efforts still owes 10% of the adjustment.
General information for the tax year shown, not advice for a specific client. Confirm the facts before you file or remit.