PATA Documentation Package

When you have a company doing business in both Canada and another country you will run into an issue of transfer pricing.  

At its most basic, transfer pricing requires you to accomplish any cross-border transactions between non-arm's length persons the same way as you would if you are dealing with a person at arm's length.  So, if your normally charge $5 for a widget, you cannot charge $20 or $1 to your subsidiary across the border but should charge $5.  As each company is trying to keep the correct tax base, this has become a bigger and bigger issue in recent years.


Easier said than done when you often don't have that easy arm's-lenth comparable.

A large part of substantiating how you determined that arm's-length transaction is keeping the Transfer Pricing Documentation.  As each different country can have different requirements for keeping documentation the process can get cumbersome and expensive for the smaller business owner.  Particularly since penalties for not keeping the documentation can be high.

The Pacific Association of Tax Administrators (PATA) have tried to reduce some of that burden by creating a PATA documentation package.  That means that Australia, Canada, Japan and the United States will all accept documentation that conforms with the PATA package.

Only one set of rules - has to be a good thing.

The PATA Documentation Package through the CRA can be found here and the same thing through the IRS can be found here.

Remember that transfer pricing documentation is contemporaneous documentation  which means that it should be done "at the same time" as you are setting those prices (not two years later when you are asked how you developed them).