Metals streaming firm Wheaton Precious Metals has reached a settlement with the Canada Revenue Agency (CRA) over transfer pricing, removing uncertainty about the use of its business model going forward.
The settlement provides for a resolution of Wheaton’s tax appeal in connection with the reassessment under transfer pricing rules of the 2005 to 2010 taxation years, related to income generated by the company’s foreign subsidiaries outside Canada.
The settlement confirms that foreign income on earnings generated by Wheaton International will not be subject to tax in Canada.
However, the service fee charged by Wheaton for the services provided to Wheaton International will be adjusted to include capital-raising costs associated with Wheaton for the purpose of funding streaming transactions entered into by Wheaton International and the mark-up applied to Wheaton's cost of providing services to Wheaton International, including the above capital-raising costs, will increase from 20% to 30%.
The additional service fee will result in increased income generated by Wheaton in Canada that is subject to Canadian tax.
In terms of the settlement, transfer pricing penalties in the reassessments will be reversed and interest will be adjusted consequentially to the adjustments. These transfer pricing principles will also apply to all taxation years after 2010, including the 2011 to 2015 taxation years, which are currently under audit, and on a go-forward basis.
"The terms of the settlement are an excellent outcome for Wheaton and its shareholders," commented Wheaton president and CEO Randy Smallwood.
"This settlement removes uncertainty with the use of our business model going forward and puts the tax issue behind us so that we can continue to focus on what we do best: building and managing our high-quality portfolio both organically and by accretive acquisitions, as we did earlier this year with the transactions on Vale's Voisey's Bay mine and Sibanye's Stillwater mines.
"With the clarity provided by this settlement, I look forward to our company again being valued solely based on the virtues of its excellent portfolio of high-quality assets and strong growth profile over the coming years."