Intercorporate management fees

Intercorporate management fees have often been used as a tax planning strategy to shift income within a corporate group. Strictly from a tax perspective, one of the principal purposes for using management fees within a corporate group is to minimize the tax exposure of one company within the group when other companies in the group suffer losses.

Although it has been the Canada Customs and Revenue Agency's (CCRA) stated administrative policy to not challenge the reasonability of salaries and bonuses paid to shareholder employees of a corporation, the Agency is not prepared to extend this policy to intercorporate management fees. This is particularly the case when these management …