Canada Revenue Agency appeals Cameco tax ruling

Late last month the Tax Court of Canada ruled in favour of Cameco (TSX: CCO; NYSE: CCJ) in the company’s decade-long dispute with the Canada Revenue Agency over tax reassessments for the 2003, 2005 and 2006 tax years.

Now the CRA says it plans to appeal the decision with the Federal Court of Appeal, a process Cameco estimates would take about two years.

Decisions of the Federal Court of Appeal can be appealed to the Supreme Court of Canada, but only if the Supreme Court agrees to hear the appeal, Cameco notes. If that happens, the company says, a further two years would be required to receive a decision.

On Sept. 26, the Tax Court ruled that Cameco was in full compliance with Canadian laws regarding the marketing and trading structure involving foreign subsidiaries and the related transfer pricing methodology used for certain inter-company uranium sale and purchase agreements.

The total tax reassessed for 2003, 2005 and 2006 was $11 million, 50% of which Cameco has already paid, and now expects to be refunded.

To date, Cameco has paid or otherwise secured $781 million in taxes, plus related interest penalties on reassessments for the tax years from 2003 to 2012 ($303 million in cash and $478 million in letters of credit), or about half of the total claimed by CRA for those years. The tax years from 2013 through 2017 have not been reassessed yet.

The Tax Court’s ruling and CRA appeal only apply to the 2003, 2005, and 2006 tax years, which were the subject of the original court case. Any further actions regarding subsequent tax years that have been reassessed (2007-2012) will be suspended until the first three years are finally resolved, the company says.

Despite CRA’s decision to appeal, Cameco says it still plans to make an application to the court to recover costs it has incurred over the course of the case. If a cost award is made, it will be at the Tax Court’s discretion.

Cameco has been reporting on its transfer pricing dispute since 2008.

The CRA had been shifting all of the income earned by Cameco’s subsidiary, Cameco Europe Ltd., back to Canada and applying Canadian steps towards tax rates, interest and penalties.