Under the Income Tax Act (Canada) taxpayers are deemed to not deal at arm’s length if they are “related”. In all other circumstances, taxpayers will be dealing at non-arm’s length (NAL) where they are factually NAL. In determining whether persons who are not related are dealing at arm’s length, courts have generally held — and the Canada Revenue Agency agrees — that persons do not deal at arm’s length in three circumstances:
- there is a common mind directing the bargain for both parties
- one party de facto controls the other; or
- the parties are acting in concert without separate interests.
Originally written for International Tax (Wolters Kluwer CCH), this article covers:
- The directing mind test
- De Facto control test
- Acting in concert without separate interests test
- Acting in concert without separate interests
- Acting at arm’s length vs. an arm’s length relationship
- Captive parties
Read the full article here [PDF]
This article was first published in International Tax, Report No.118, June 2021.