Canada Proposes Simplified Transfer Pricing Documentation for SMEs

23 July 2026 - Canada publishes draft legislation intended to reduce the transfer pricing documentation burden for smaller businesses and lower-value transactions.

The government has invited public submissions until 4 September 2026, ahead of possible introduction in Parliament this autumn. The rules remain in consultation and are not yet law.

Effective date

The Simplified regime is proposed to apply to taxation years beginning on or after 1 January 2026, subject to the legislation being finalised after the consultation process.

Which companies / transactions qualify?

Simplified documentation may be available in four situations:

#	Category	Transaction type	Threshold
1	Small taxpayer	Canadian multinational groups with Canadian gross revenue	no more than C$25 million
2	Tangible goods	Related-party purchases or sales of tangible goods	no more than C$5 million
3	Services	Intragroup service charges	no more than C$2 million
4	Loans	Intercompany loan interest	no more than C$1 million annually

The small-business category (category 1) would not be available where the taxpayer has transferred intangible property or paid or received related-party royalties - though such companies may still qualify under one of the transaction-specific categories.

Electing into the regime

An election is required to access the simplified regime, and must be filed by the documentation due date for the relevant taxation year. A small-taxpayer election covers all of the group's qualifying transactions for the year; the transaction-specific categories can instead be elected individually, transaction by transaction.

Anti-avoidance rule

A taxpayer will be treated as not qualifying for Simplification measures if it is reasonable to conclude that one of the purposes of a transaction was to access the Simplified regime.

What is "simplified" documentation?

The proposals reduce the amount of information that must be included in the documentation - they do not remove the requirement to support arm's-length pricing.

A qualifying taxpayer would still need to document:

• the parties, amounts and key transaction terms,

• the transfer pricing method used,

• the resulting price, margin or interest rate,

• the basis for concluding that the result is arm's length, and

• any material changes in subsequent years.

For an intercompany loan, documentation would still include relevant terms such as the principal, currency, issuance date, maturity, duration, purpose, interest rate, payment terms and borrower credit rating.

Simplified documentation would need to be provided to the Canada Revenue Agency (CRA) within 30 days of a written request.

Practical implications for SMEs

Practically speaking, the Simplified regime's main benefit for many qualifying taxpayers is a shorter, more targeted deliverable.

Having said that, the real benefit may arguably be quite modest for some. For example, for low-value transactions, the simplified requirements largely mirror the documentation that would be expected under existing CRA guidance in any event.

The Simplification measures do not exempt a transfer pricing analysis - benchmarking is likely to still be required, particularly for distributors, service providers and for intercompany financing arrangements.

Next steps

Canadian businesses and their tax advisers — and any group with a Canadian counterparty to an intercompany loan, service arrangement or goods transaction — should:

• identify potentially qualifying transactions,

• confirm whether any royalty or intangible arrangements create an exclusion,

• watch for the anti-avoidance rule when structuring transactions near the thresholds, and

• ensure that defensible support can be produced within the new 30-day response period.

Source: Government of Canada, draft legislative proposals released 23 July 2026 (comment period open until 4 September 2026).