Transfer Pricing Contemporaneous Documentation Simplification Measures

Subsection 247(4.1) of Canada’s rewritten transfer pricing rules introduces an elective simplified contemporaneous documentation regime that may reduce the compliance burden for eligible taxpayers and partnerships. Where the relevant entity qualifies and makes an election, the simplified regime applies in lieu of the more specific requirements of subsection 247(4). The simplified regime is proposed to apply to taxation years beginning on or after January 1, 2026.

On July 23, 2026, the Department of Finance released draft regulations outlining the eligibility criteria for and scope of the simplified regime. Here are five takeaways for businesses:

1. The simplified regime still requires taxpayers to complete a supporting transfer pricing analysis. Taxpayers must, in each case, document the analysis that was performed to justify that the amounts in question are based on arm’s length conditions. Taxpayers must also make or obtain records or documents describing each of the (i) terms and conditions of any relevant transactions (including the purpose of any loans) and (ii) material changes in subsequent years.
2. The specific requirements of the supporting transfer analysis remain unclear. The accompanying Explanatory Notes explain that the transfer pricing analysis required under the simplified regime “generally includes a description of the transfer pricing results, the transfer pricing method used, and the identity of the tested party.” However, Finance has not provided any guidance on how these very general guidelines differ, in practice, from the more specific requirements of subsection 247(4).
3. The simplified regime is available to “small taxpayers and partnerships” with gross revenue up to C$25-million. The C$25-million threshold includes the revenue of all other members of the multinational group resident in Canada (other than a member of a partnership if that partnership is seeking to rely on these rules). The gross revenue of the relevant entities must be documented, and there are exclusions for taxpayers that transfer intangible property or pay any royalty to a related non-resident in the relevant year.
4. The simplified regime is also available to taxpayers for certain small transactions. This includes transfers of tangible property with a gross amount paid or payable up to C$5-million for the year, intra-group services with a gross amount paid or payable up to C$2-million for the year, and loans with a gross amount of interest paid or payable up to C$1-million for the year.
5. There is an anti-avoidance rule in section 9805 of the regulations, which applies where it is reasonable to conclude that one of the purposes of a series of transactions is to benefit from the simplified regime.

No details have been released yet regarding the form of election that will be required to opt into the simplified regime.

Have more than five minutes? For more information, please contact the authors or any other member of our Transfer Pricing or Tax groups.