Related PersonsMemorandum D13-3-2

Ottawa,August 9, 2013 This document is also available inPDF (302 KB)[help with PDF files] The editing revisions made in this memorandum do not affect or change any of the existing policies or procedures. This memorandum outlines the effect upon the application of various methods of valuation of provisions in theCustoms Actpertaining to related persons.

Sections 48 to 53 of theCustoms Act.

1. Under subsection 45(3), persons are related to each other if: (a)they are individuals connected by blood relationship, marriage, common-law partnership or adoption within the meaning of subsection 251(6) of the Income Tax Act;(b)one is an officer or director of the other;(c)each such person is an officer or director of the same two corporations, associations, partnerships or other organizations;(d)they are partners;(e)one is the employer of the other;(f)they directly or indirectly control or are controlled by the same person;(g)one directly or indirectly controls or is controlled by the other;(h)any other person directly or indirectly owns, holds or controls five per cent or more of the outstanding voting stock or shares of each such person; or(i)one directly or indirectly owns, holds or controls five per cent or more of the outstanding voting stock or shares of the other. 2. The existence of a relationship is relevant to the determination of the value for duty in the following situations: (a)under paragraph 48(1)(d), the transaction value determined in a sale between related persons cannot be used as the value for duty unless the requirements of that paragraph are met (refer toMemorandum D13-4-5,Transaction Value Method for Related Persons);(b)under paragraph 48(3)(a), when establishing the acceptability of the transaction value in a sale between related persons using the test values, the transaction value of identical or similar goods, which are likewise sold to a related person, cannot be used (refer toMemorandum D13-4-5); and(c)under paragraph 51(3)(a), a sale between related persons cannot be used to determine the "price per unit" when valuing goods using the deductive value method (refer toMemorandum D13-7-1,Deductive Value Method – Determination of the Price Per Unit).

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