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(8.7.2021 with the participation of Peru 131). OECD Significant Transfer Pricing
announced that the reform framework, including the
implementation plan, will be completed in October 2021 and Disputes – III
will begin its implementation in 2023. Cameco-Canada Federal Court of

How much tax income is excepted? Appeal Decision

According to the OECD statement, “digital economy taxation On 26 June 2020, Canada’s Federal Court of Appeal released
rules” transfer the taxation right on profits of more than its decision in the case of The Queen v. Cameco Corporation,
100 billion USD every year to the market countries where an appeal of the September 2018 Tax Court of Canada
this income is obtained; With the “15% global minimum decision in Cameco Corporation v. The Queen. The Federal
corporate tax rate”, additional global tax revenues are Court of Appeal upheld the Tax Court’s decision in favor of
expected to increase by approximately $150 billion each the taxpayer, and in doing so issued a detailed interpretation
year. The foreseen regulations are expected to stabilize of the transfer pricing recharacterization provisions in the
the international taxation system and contribute to the Income Tax Act.
predictability of taxation between taxpayers and tax
administrations. 1. Facts

What sort of international tax reform? During the taxation years in issue (2003, 2005 and 2006),
Cameco Corporation was one of the world’s largest uranium
In the first stage, new taxation rules were determined for producers and suppliers of conversion services. In the late
digital companies; Taxation based on physical workplace, 1990s, Cameco’s European subsidiary Cameco Europe S.A
which has been the basis of the OECD and UN Tax Model entered into an agreement with the Russian Government to
applied to date, is coming to an end. Now, apart from the purchase certain amounts of highly enriched uranium (the
"physical workplace", "nexus" (link or connection) has fallen Tenex Agreement) and an agreement with Urenco Limited
into taxation jargon. to purchase a certain amount of natural uranium (the Urenco
Agreement).
What is Nexus? In fact, the “digital service tax” that came
into force with the Law No. 7194 in Turkey is a typical During that period, Cameco reorganized itself. Following
example of this. In other words, a “nexus” will occur when the reorganization, the Cameco group had three main
“multinational companies” with annual global revenue of 20 entities: the Canadian entity, which continued to operate
billion Euros (the 20 billion Euro threshold will be reduced to uranium mines and conversion facilities in Canada along with
10 billion Euros in 7 years) and a profitability of more than providing administrative support services to other Cameco
10%, generate a profit of 1 million Euros or more from a entities; CESA/CEL, a Swiss entity that was the trader for
country market and the source country will be taxed on 20- the group, purchasing and selling uranium from Russia and
30% of this profit. Compared to the 750 million Euro revenue from the Canadian and US affiliates; and Cameco US, which
threshold in digital services taxes, the profitability ratio of 20 was the marketing arm responsible for selling the uranium to
billion Euros and over 10% seems high. third parties for use in nuclear reactors.

Unilaterally applied “digital service taxes and likewise” shall From 1999 to 2001, CESA/CEL entered into nine long-
be annulled upon the entry into force of the regulation. term agreements with Cameco which used a base escalated
pricing model. In addition, from 1999 to 2006, CESA/CEL
Second phase shall be utilized in fighting against “global base and Cameco entered into twenty-two agreements to deliver
erosion” (GloBE”). GloBE aims to “avoid difficulties generated uranium to Cameco on a specific date or short-term delivery
by digitalization and globalization in international taxation period that used a fixed or market-based price.
and establish a taxation environment through ensuring tax
equity based on transparency and equal conditions”. With The Canadian Tax Administration reassessed Cameco’s
regulation, “re-taxation” right is ensured in the resident revenue for taxation years of 2003, 2005, and 2006 and
jurisdiction of the parent company for MNEs which have an decided to increase Cameco’s income to include all of the
annual consolidated revenue more than EUR 750 million profits from CESA/CEL. The Administration relied i) on the
in case initial jurisdiction does not use its taxation right or legal doctrine of sham, and ii) on paragraphs 247(2)(b) and
income is subject to lower rate of effective taxation in related (d) of the Income Act to recharacterize the transactions.
jurisdiction. The administration claimed that Cameco, as an arm’s-length
person, would not have entered into the transactions with
Both of the regulations may increase tax incomes of CESA/CEL. Lastly, Canadian Tax Administration relied on
developed and developing countries. However, such paragraphs 247(2)(a) and (c) of the Income Act to re-
regulations are expected to impact choices of jurisdictions evaluate the transactions. The reassessments increased
in which intangible assets from direct foreign capital Cameco’s income by approximately 483 million CAD for the
movements. three years in dispute.
2. Tax Court of Canada
This is the summary of the article published in the
Ekonomist magazine’s issue 2021/15, dated 25.07.2021. On September 2018 The Tax Court of Canada decided in
favor of Cameco. The Tax Court concluded that none of
the transactions, arrangements or events in issue was a
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