TheCameco case constitutes another landmark case in the field of transfer pricing elaborating on the notion of legal certainty regarding the conditions for the recharacterization of a transaction for transfer pricing purposes. Being the first case to consider the recharacterization provision in Canada’s Income Tax Act (“recharacterization rules"), in June 2020, the Federal Court of Appeal (FCA) upheld the decision of the Tax Court of Canada (TCC) issued in 2018. The Cameco decision further reinforces that the OECD TPG – as well as the Canadian recharacterization rules – do not support speculative reconstruction exercises by revenue authorities, which often tend to dictate to a taxpayer in what way a business should be run or its operating efficiency, and that actual transactions and business decisions made by the taxpayer should only be disregarded or substituted in exceptional cases, given that specific criteria are met.
