Decision by the SCC Canada v GlaxoSmithKline Inc

panoramic view of supreme court of canada audience chamber

in unanimous decision rothstein j., appeal , cross-appeal dismissed.

appeal

while s. 69(2) not state reasonable amount , oecd guidelines provide commentary , methodology pertaining issue of transfer pricing. however, test of set of transactions or prices must determined according s. 69(2).

the trial judge erred in relying on singleton , shell canada requiring transaction-by-transaction approach, s. 69(2) requires price established in non-arm’s length transfer pricing transaction redetermined if between parties dealing @ arm’s length. if circumstances require, transactions other purchasing transactions must taken account determine whether actual price or not greater amount have been reasonable had parties been dealing @ arm’s length.
the oecd guidelines state proper application of arm’s length principle requires regard had “economically relevant characteristics” of arm’s length , non-arm’s length circumstances ensure “sufficiently comparable”.
considering licence , supply agreements offers realistic picture of profits of glaxo canada. cannot irrelevant glaxo canada’s function secondary manufacturer , marketer. did not originate new products , intellectual property rights associated them. nor did undertake investment , risk involved originating new products. nor did have other risks , investment costs glaxo group undertook under licence agreement. prices paid glaxo canada adechsa payment bundle of @ least rights , benefits under licence agreement , product under supply agreement.

it noted issue whether purchase price includes compensation intellectual property rights granted glaxo canada had not been argued before scc, , still trigger potential further liability part xiii withholding tax. may still raised during subsequent rehearing @ tcc.

the following further guidance given respect forthcoming redetermination trial judge:

cross-appeal

the assessments based on 2 assumptions:

the appellant paid adechsa, whom not dealing @ arm’s length, price ranitidine greater amount have been reasonable in circumstances if appellant , adechsa had been dealing @ arm’s length
any amounts paid appellant adechsa on , above prices paid other canadian pharmaceutical companies not supply of ranitidine

only second characterized having been demolished, if glaxo had been successful in establishing prices paid reasonable, first have been demolished well. l’heureux-dubé j. had stated in hickman motors ltd. v. canada, taxpayer’s burden “‘demolish’ exact assumptions made minister no more”.

as glaxo had conceded @ fca court determine reasonable amount, within fca s discretion remit question tcc determination. accordingly, aspect of fca s ruling upheld.