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from Transfer Pricing
'Cameco' decision addresses the
sham doctrine in Canada
November 13, 2018
The Tax Court of Canada (the TCC or the Court) on September 26 published its decision in Cameco
Corporation (2018 TCC 195), resolving a long-running dispute between Cameco Corporation (Cameco,
the Appellant) and the Minister of National Revenue (the Respondent) involving reassessments to
Cameco's 2003, 2005, and 2006 taxation years.
The adjustments made in the reassessments related to the prices used in the purchase and sale of
uranium contracts involving Cameco, Cameco Europe (CESA, a Swiss branch of Cameco's Luxembourg
subsidiary) and, later, its Swiss subsidiary (CEL), as well as its US-based subsidiary (Cameco US) and
third parties. The Minister's reassessments were based on arguments that Cameco's structure
specifically the reorganization that took place in 1999 was a sham. The Minister further argued that
CESA/CEL performed few if any valuable functions during the years under consideration and,
accordingly, that reassessments were warranted pursuant to either paragraphs 247(2)(b) and (d) or
paragraphs 247(2)(a) and (c) of the Income Tax Act (the Act).
In short, the Court held that the Appellant and its related entities did not factually misrepresent their
legal arrangements or the transactions created by those arrangements, and that consequently there was
no sham. The Court also determined that the transactions were carried out for a bona fide business
purpose, and the terms and conditions of the transactions were those that would have existed between
arm's-length parties under the same or similar circumstances. Consequently, neither paragraph
247(2)(a) nor 247(2)(b) applied. The Court allowed the appeal and vacated the reassessments.
This Tax Insight focuses on the Court's findings in respect of the sham argument. See our previous Tax
Insight for details on the Court's findings in respect of the application of paragraphs 247(2)(a) and (c) of