Multinationals beware Canadian excise tax on cross-border premiums
March 09, 2009
A common intercompany transaction between multinational enterprises (MNEs) may result in unforeseen excise tax payments and late filing interest. Matthew Sambrook and Greg Noble of Ernst & Young in Canada explain the dangers.
In recent times, and particularly in light of the global economic downturn, many MNEs have sought to minimise costs, improve efficiencies and mitigate risk within their corporate groups by centralising certain management and administrative activities. Normally, these activities are charged out to the various group companies in a manner proportional to the economic benefit received by such a service. This type of centralised service function is ubiquitous within MNEs and is governed by the OECD transfer pricing guidelines and the Canadian administrative transfer pricing guidance.
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