Cameco president and CEO Tim Gitzel
The Tax Court of Canada has ruled in favour of uranium miner Cameco in its dispute of the reassessments issued by Canada Revenue Agency (CRA) for the 2003, 2005 and 2006 tax years, bringing to an end one of the largest-ever cases to reach this particular court.
The case dates back to 2008, when the CRA took issue with Cameco’s corporate structure and pricing methodology. The CRA questioned the company’s practise of selling uranium at a low fixed price to its European subsidiary, which then sold the product at a higher world price, resulting in more profits being booked in Europe than in Canada. Cameco in 1999 opened Swiss-based Cameco Europe, which had a more favourable tax regime.
The tax authority argued that the intercompany transactions were commercially unreasonable and undertaken only to achieve a tax benefit.
However, the Tax Court this week ruled that Cameco’s marketing and trading structure involving foreign subsidiaries and the related transfer pricing methodology used for certain intercompany uranium sale and purchase agreements were in compliance with Canadian laws for the tax years in question.
“We are very pleased with the Tax Court’s clear and decisive ruling in our favour,” Cameco president and CEO Tim Gitzel said in a statement on Wednesday, but lamented the uncertainty that it created for investors and said that it would move to recover the costs incurred over the course of the case.
“We followed the rules, yet this dispute has caused significant uncertainty for our investors during a period of prolonged weakness in markets for our products. Now, we hope CRA accepts the decision and applies it to other tax years in dispute, so we can focus on managing our business for the benefit of all our stakeholders.”
The court has referred the matter back to the Minister of National Revenue in order to issue new reassessments for the 2003, 2005 and 2006 tax years in accordance with the court’s decision.
Cameco noted that the timing for the issuance of the revised reassessments along with refunds and interest was uncertain.
CRA has 30 days from the date of the decision to appeal to the Federal Court of Appeal. If appealed, Cameco estimates it would take about two years for the Federal Court of Appeal to hear and decide the matter.
Decisions of the Federal Court of Appeal may be appealed to the Supreme Court of Canada, but only if the Supreme Court agrees to hear the appeal. If an appeal to the Supreme Court is pursued, Cameco estimates that a further two years would be required to receive a decision.