Cameco said on Monday (27 March) that past court rulings require the CRA to refund all CAD780m the company has been seeking in a dispute over its transfer pricing transactions for the 2007-2013 tax years.
Cameco said a series of court decisions that were “completely and unequivocally” in Cameco’s favour for the 2003, 2005 and 2006 tax years determined that the income earned by Cameco’s foreign subsidiary from the sale of non-Canadian produced uranium was not taxable in Canada.
Cameco said the CRA had issued revised reassessments for the 2007 to 2013 tax years that will result in it being refunded CAD300m, consisting of CAD89m in cash and CAD211m in letters of credit.
But it said the CRA continues to hold a further CAD480m, consisting of CAD206m in cash and CAD274m in letters of credit, that Cameco has remitted or secured to date, tying up a significant portion of the company’s financial capacity.
The dispute was the first Canadian court case to consider the “transfer pricing recharacterisaton rule” in Canada’s Income Tax Act.
Canadian law firm BLG said Cameco had created a European sales subsidiary, Salesco, which entered into commercial opportunities to acquire uranium from arm’s length third parties.
Cameco also entered into long-term contracts to sell uranium it produced to Salesco, following which the price of uranium rose significantly.
As a result, profits from uranium sales by Salesco indirectly to buyers outside of Canada were realised largely in Switzerland by Salesco rather than in Canada by Cameco.
Cameco said that while the pending return of CAD300m is positive and warranted, its broader tax dispute with the CRA remains ongoing.